Lifetime ISAs guide

hbell86

There are actually three separate possible options to consider here when assessing how much of the interest paid into a HTB ISA during 2017/18 counts towards the annual £4K LISA allowance when transferring!
None.
All.
Only a pro rata amount relating specifically to the period since 6 April 2017.
hbell86's Skipton advisor is apparently saying option 1 but it's not clear whether NevvyC's one is going with option 2 or 3.

The ISA scheme rules (as quoted in post #1096 above) seem to suggest that option 2 is the right answer but the Treasury letter subsequently clarified that option 3 is the correct one

I tweeted Martin Lewis and the Martin Lewis Show about this confusion with Skipton. Within 15 minutes I had a reply from Skipton saying sorry for this confusion and interest made this tax year does count towards your LISA allowance. And they even phoned me up.

But this is where it gets confusing the person I spoke to from Skipton said, I have £1900 left to invest this tax year. And I know this figure does not include the interest made from my H2B ISA. When I asked the person about this, he said it’s because my H2B ISA provider hasn’t provided Skipton with that information about the interest I have made. Therefore he advised me that I was able to invest £1900.

This is a bit of a mess. I’m pretty sure the HMRC will catch up with those that over invest, and probably adjust the 25% bonus.

Do you all agree?

Alexland

Yes I doubt HMRC will be too severe around this issue. Still it's nice to make every attempt to follow the rules.

Amoux

I think it is also worth mentioning that it matters when the interest is paid out to you. In case of Halifax HtB the interest is paid out every 12 months. I'm not sure about other providers.

So in my example, I opened the Halifax HtB on December 2015 contributed the maximum every month and was given £91.68 interest during December 2016 (tax year Apr 2016-Apr 2017).

I then submitted a transfer to a HL LISA on 12th April 2017 which was completed 26th April 2017 in which I got £56.50 interest. This interest is credited/paid in the tax year Apr 2017 - Apr 2018 despite some of that interest accumulating during the previous tax year.

So I think technically that £56.50 counts towards the £4000 LISA allowance, even though HL didn't deduct it. I'm undecided what to do, but may just deduct the £56.50 to keep in spirit of the rules. But I'm pretty sure since the providers have made such a mess of it, that HMRC are not going to waste their time making such trivial corrections.

AirlieBird

Amoux wrote: »

I then submitted a transfer to a HL LISA on 12th April 2017 which was completed 26th April 2017 in which I got £56.50 interest. This interest is credited/paid in the tax year Apr 2017 - Apr 2018 despite some of that interest accumulating during the previous tax year.

So I think technically that £56.50 counts towards the £4000 LISA allowance, even though HL didn't deduct it. I'm undecided what to do, but may just deduct the £56.50 to keep in spirit of the rules. But I'm pretty sure since the providers have made such a mess of it, that HMRC are not going to waste their time making such trivial corrections.

Accrued interest in a HTB ISA at 5th April 2017 does not count towards the £4,000 allowance. This interest rule has just added unnecessarily complication. Nothing is provided to indicate how much interest was accrued in each tax year and it is unreasonable to have savers work out. I'm not even sure whether that information is passed between providers.

dkilvington1

Hi,

One question I have that I'm struggling to find an answer to:

I opened a stock and shares LISA in April 2017 and I'm now transferring this to the Skipton LISA I opened in December. As I want to buy a house after April, thus need to have had the LISA open for 12 months. Does the Skipton LISA date change to April 2017, thus meaning I have had a LISA open for 12 months and can use the bonus to buy a house?

I really don't understand how this works.

Any help would be most appreciated.
David.

Saek

dkilvington1 wrote: »

Hi,

One question I have that I'm struggling to find an answer to:

I opened a stock and shares LISA in April 2017 and I'm now transferring this to the Skipton LISA I opened in December. As I want to buy a house after April, thus need to have had the LISA open for 12 months. Does the Skipton LISA date change to April 2017, thus meaning I have had a LISA open for 12 months and can use the bonus to buy a house?

I really don't understand how this works.

Any help would be most appreciated.
David.

This has been confusing me to, I would also appreciate the help!

eskbanker

Transferring between LISAs preserves the start date of the older one rather than restarting the clock - the description of this in the MSE article isn't particularly clear and even the version in the official rules could be worded better but it does include the key sentence "The 12 month rule applies to the earlier account in relation to transferred Lifetime ISAs" within clause 9B.43a.

Kami_J

Alexland wrote: »

According to Nutmeg's own data, holding money in shares for only 1 year has around a 25% probability of a loss at the end. Now those odds might change depending on what proportion of shares and bonds you have in your portfolio but investment bonds also have the potential to suffer losses. S&S LISAs are best suited to people with an investment timeline of at least 5 years by which time the probability
Anyway - firstly consider if the HTB ISA meets you needs for the property purchase - in particular is the £250k limit outside London going to be an issue as LISAs allow £450k nationwide. Also are you in a position to contribute more than the £200 per month - would the extra circa £1600 contribution limit be useful both this and next tax year?

If you do decide to switch to using the LISA for your property purchase then Nutmeg don't support HTB ISA transfers so act quickly to ask Skipton to transfer both your Nutmeg LISA and HTB ISA and top up.

Alex

Thank you for this Alex. The things you mentioned were exactly the reasons we were thinking of switching to Skipton. We live in London, but chances are that the property we buy will fall outside of London limits. We do have funds to top up to 4,000 as well.

Should I open the Skipton account and then talk to them about the transfer or is it something I should be flagging up before/during opening of the account?

Alexland

Kami_J wrote: »

Thank you for this Alex. The things you mentioned were exactly the reasons we were thinking of switching to Skipton. We live in London, but chances are that the property we buy will fall outside of London limits. We do have funds to top up to 4,000 as well.

Should I open the Skipton account and then talk to them about the transfer or is it something I should be flagging up before/during opening of the account?

'outside of London limits' - do you mean the property will be in London above £450k (in which case beware the LISA withdrawal penalty would apply) or the property will be outside London and between £250k and £450k in which case a LISA would be fine?

I suggest you read all the information on the Skipton website first then if you want to talk to them to check or confirm anything it's just the cost of an 0345 phone call. Their cutoff date for a HTB ISA transfer this year is the end of Feb but I would get it started early in case there are any unexpected delays.

Alex.

NAD57891

Alexland wrote: »

To be honest you are where you are and if HMRC detect a problem they will probably contact you anyway. If you have not sought any unfair advantage from the situation and remained within the LISA and overall ISA contributions for the year I would imagine they will be reasonable and you should still get your LISA bonus.

Yes that's hopefully what would happen if there has been an error. It's still good to find out and share, I've discussed it further and it seems like what I've done is fine. However, the issue is a difficult one to understand and clearly there's conflicting information.

I did also confirm with HL that the interest added this year into my H2B ISA would count towards the Lifetime ISA allowance. I didn't get into the whole when and on which year's subscription, I'll play it on the safe side and keep under the allowance.

Imagine if the LISA is invalidated because of this and subsequently I've closed my H2B so lost that - I'll be knocking on number 10!

Thanks for the help and clarity!