Lifetime ISAs guide

Alexland

NevvyC wrote: »

Just to confirm H2Bs and LISAs are BOTH tax-free savings products ?

Yes.

NevvyC wrote: »

Also, is anyone able to clarify regarding interest earned on H2B balances post 05.04.17 (does this detract from the maximum 4K LISA subscription allowance for the 17/18 tax year as I'm seeing conflicting ideas reading through this thread!)

I think we are in agreement that it should reduce the £4k limit but this doesn't seem to be happening in practice with the information that HTB providers are handing over to LISA providers.

Alex

Cash-Strapped.T32

Alexland wrote: »

If you are only investing for 5 years or less also worth considering account closure charges so maybe build a spreadsheet to determine if AJ Bell or HL work out cheaper for your situation.

Thanks for the advice - Well, I built a small spreadsheet to compare the two, HL vs AJB; It's very close, but notwithstanding any closure charges, HL comes out on top.

Iirc the HL closure fee is £25+vat - taking that into account HL still comes out on top, albeit by a smaller margin.

(Ok, it is very simplified, only looking at the annual fee of 0.45% for HL, 0.25% for AJB, plus the monthly £1.50 purchase fee for AJB) - assuming I'm contributing a fixed amount each month, into a single fund).

I know it's a bit of a crude sketch I've drawn for myself, but I'm erring toward HL.
I'm assuming 5yrs, but then again it's entirely possible I'll be saving for 6 or more yrs (my timeframe is determined more by the amount I save, than by some kind of personal situation) so if it looks like I'll be purchasing sooner, I can think about moving either back to cash -albeit with a bit of a fee - or more heavily towards bonds/etc...

Cheers again Alex, much appreciated. :beer:

System

Thanks for confirming.

And quite! Thing is I thought I read somewhere previously that interest earned on the H2B balance post 05.04.17 didn't count towards the 17/18 4K allowance but a Skipton rep I spoke to thought otherwise - thing is if the wrong numbers have been provided between institutions then that's bank error and we as individuals can't be penalised for their mistakes ? (And ergo, should just be able to go ahead and crack a full 4K into the account without penalty / reprecussions?!)

For me, personally, I didn't earn a lot of interest over the past year on my H2B so I'm actually not too bothered either way, but some may have hundreds in interest ! Would be nice just to have 100% clarification but I suppose that's one of the teething problems with new products and I'll probably err on the side of caution just for the figures involved in my personal circumstances ...

Alexland wrote: »

Yes.



I think we are in agreement that it should reduce the £4k limit but this doesn't seem to be happening in practice with the information that HTB providers are handing over to LISA providers.

Alex

Alexland

NevvyC wrote: »

Thing is I thought I read somewhere previously that interest earned on the H2B balance post 05.04.17 didn't count towards the 17/18 4K allowance but a Skipton rep I spoke to thought otherwise - thing is if the wrong numbers have been provided between institutions then that's bank error and we as individuals can't be penalised for their mistakes ? (And ergo, should just be able to go ahead and crack a full 4K into the account without penalty / reprecussions?!)

It gets complicated if an interest payment is made during the current tax year (such as upon account closure) in which part of the interest was earned in the previous tax year. In that situation the interest paid but not related to the current year shouldn't count towards the £4k allowance.

I guess the problem is that HTB ISA managers will not be experts in the terms of the LISA product that they have decided not to sell as it's too complicated. But then they get dragged into the LISA complexity anyway on transfers.

If you want to play it safe limit your top-up contribution.

Alex.

Vix10

I've been trying to find out what would happen if Skipton BS (or the Government) ever withdrew the Cash LISA. As Skipton BS is literally the only cash LISA provider in the country, there would be nowhere to transfer it to. So my query was would we be charged the 25% government withdrawal penalty if it the cash LISA product was withdrawn.

I did a Web Chat with Skipton BS and they said they don't have this anywhere in writing as they don't plan to withdraw it (I thought T&C's were meant to cover any future scenario, but obviously not!) and they couldn't tell me if we would be subject to the 25% withdrawal charge in such a scenario. They told me "HMRC would be a lot more helpful to contact regarding this as we operate the product under there rules."

So.... I phoned up HMRC. They guy I spoke too went to check the guidance and said that it doesn't mention ANY withdrawal penalty, at all! So he clearly didn't know and couldn't help.

So if this scenario eveyr happens, who knows. Seems like noone has planned for it in any case. Great.

Alexland

Vix10 wrote: »

I've been trying to find out what would happen if Skipton BS (or the Government) ever withdrew the Cash LISA. As Skipton BS is literally the only cash LISA provider in the country, there would be nowhere to transfer it to. So my query was would we be charged the 25% government withdrawal penalty if it the cash LISA product was withdrawn.

If Skipton exited the market you could transfer the LISA to Hargreaves Lansdown or AJ Bell YouInvest and leave it uninvested cash.

Vix10

If Skipton exited the market you could transfer the LISA to Hargreaves Lansdown or AJ Bell YouInvest and leave it uninvested cash.

Do they charge for it though?

Alexland

Vix10 wrote: »

Do they charge for it though?

They only charge for trading activity, custody of investments and an account closure fee. You would lose the interest but if you are in a cash LISA then it's hopefully a short term account before buying your first property.

kozor

Crash coursed the last 10 pages of this thread to avoid asking the same questions- there was someone in a similar position a few pages ago but with a slightly different twist. I also can't find much info on the internet.

Been maxing HTB ISA since inception, put £1,600 into Nutmeg LISA once it was released (for this tax year's total £4k max LISA contribution).

As with a recent poster I've just found out that Nutmeg LISA will not offer HTB transfers. So my likely action is to transfer my LISA into HL/Skipton followed by my HTB.

The question is will this reset my LISA timer back to 12 months? Or will it remain at April '17?

I'm hoping to buy this year so I'll be very irritated at Nutmeg if the latter!!

eskbanker

Transferring a LISA between providers doesn't reset the timer.