Lifetime ISAs guide

elicorde

Hi all, I am sure the information I need will be somewhere in this thread but I am getting so confused about the ins and outs of the LISA I would really really appreciate someone answering my questions My partner and I currently have about £12,500 in two Help 2 Buy ISAs which we're planning on transferring to LISAs before April to get the extra bonus.

My question is - how does the LISA bonus work after April '18? From what I've managed to understand, you get like 1/12 of 25% added on per month, so you couldn't just transfer the whole £4k in just before April '19 to get the £1k bonus like you could in year 1? So it would be better to transfer £4k in all at once at the beginning of the new tax year i.e. after April '18?

Thank you so much anyone who takes the time to answer what must seem like really basic questions! :T

eskbanker

elicorde wrote: »

how does the LISA bonus work after April '18? From what I've managed to understand, you get like 1/12 of 25% added on per month, so you couldn't just transfer the whole £4k in just before April '19 to get the £1k bonus like you could in year 1? So it would be better to transfer £4k in all at once at the beginning of the new tax year i.e. after April '18?

Sounds like you've misunderstood the new monthly bonus payment arrangement that kicks in in the new tax year - it isn't split into twelfths but paid in full the month after the contributions are made.

So, if you pay £4K into a LISA at the very start of the tax year on 6 April, you'll get a £1K bonus paid in late May (2018). Whether this is better than funding the LISA at the end of the tax year (which is also an option which would pay a full bonus) depends on various factors, such as when you'd be buying and what else you'd plan to do with the money in the mean time, given that Skipton's paltry 0.75% interest isn't hard to beat....

elicorde

Thanks so much for responding I wrote that post very confusingly reading it back! So what I'm talking about is the year 2 bonus, from April 18-19, does that work in the same way as the one you get for paying in in March this year? It's just the MSE guide says this, which confused me:

"First year's bonus paid in April/May 2018; after which it's paid monthly"

So for the second bonus, does it matter when you pay into the LISA as to how much bonus you get? Thanks again and sorry if I'm getting the wrong end of the stick again!!

Kim_13

elicorde wrote: »

Thanks so much for responding I wrote that post very confusingly reading it back! So what I'm talking about is the year 2 bonus, from April 18-19, does that work in the same way as the one you get for paying in in March this year? It's just the MSE guide says this, which confused me:

"First year's bonus paid in April/May 2018; after which it's paid monthly"

So for the second bonus, does it matter when you pay into the LISA as to how much bonus you get? Thanks again and sorry if I'm getting the wrong end of the stick again!!

The bonus depends purely on what you pay in. So if you paid in £4,000 on April 6th, it would earn a £1,000 bonus the following month. The £4,000 would earn the same £1,000 bonus if you waited until (say) 1st April 2019 to pay it in (assuming there is no change in the rules, of course.) If you staged the deposits into 4 lots of £1,000 over 4 different months for example, each bonus would be £250, but over the course of the year you're still earning the same £1,000 bonus

lpyy

Alexland wrote: »

The problem is that you are not allowed to transfer part of your split Cash ISA contributions for this year into another type of ISA. Under ISA rules you must transfer both parts which may not be possible (without partial withdrawal from the regular part) if it exceeds the LISA limit for this year.

Alex

Hi Alex,

I would be grateful if you could kindly provide some further clarifications on the split cash isa please.

I hold both cash & HTB ISA with NW and thinking to transfer the HTB to Skipton soon. I did not make any payments to the cash ISA last year apart from the interest earned & a credit transaction on 06 April 2017 due to payment made on 05 April 2017 night. I remember the last time I checked the account I was able to see what it is my current year ISA remaining balance and if I remember correctly NW did not deduct the 06 April 2017 payment from my annual ISA allowance so hopefully it is still treated as payment made in tax year 2016-2017 (strangely when I checked the website today again I can no longer see this infor..?).

I was just wondering in my case would there be any problem to transfer out the H2B and leave the Cash ISA active until further instructions.

Thank you!

elicorde

Kim_13 wrote: »

The bonus depends purely on what you pay in. So if you paid in £4,000 on April 6th, it would earn a £1,000 bonus the following month. The £4,000 would earn the same £1,000 bonus if you waited until (say) 1st April 2019 to pay it in (assuming there is no change in the rules, of course.) If you staged the deposits into 4 lots of £1,000 over 4 different months for example, each bonus would be £250, but over the course of the year you're still earning the same £1,000 bonus

Thank you So really, the best thing to do would be to keep the H2Bs open and pay the £200/month into those for the interest, and pay nothing more into the LISA until just before the end of the 2018-19 tax year, then pay in the £4k all at once to get the max bonus? The only advantage to paying more into the LISA early on would be to earn the 0.75% interest on the principle + the bonus, but you could earn a lot more interest elsewhere. OK, if that's all correct that's been really helpful, thank you to both responders! :T

Kreacher

Alexland wrote: »

Anything in the HTB ISA from previous tax year(s) does not count towards this year's limit.

If transferring a HTB ISA to a LISA the maximum you can contribute this tax year across both accounts plus any interest paid on the HTB ISA this tax year (excluding any interest earned in the previous tax year but paid in this tax year) is £4k.

So if you have contributed £100 to the LISA and £2,000 to the HTB then the amount you can still contribute to the LISA is £4000 - £100 - £2000 = £1,900 minus the interest earned this tax year.

The interest earned this tax year will be any interest paid this tax year (minus any proportion of that payment earned in the last tax year) plus the final interest payment on transfering the old account.

Alex

Thank you. I spoke to Skipton to get confirmation and they said I have £2100 of my allowance left... Very confused!

System

eskbanker wrote: »

Sounds like you've misunderstood the new monthly bonus payment arrangement that kicks in in the new tax year - it isn't split into twelfths but paid in full the month after the contributions are made.

So, if you pay £4K into a LISA at the very start of the tax year on 6 April, you'll get a £1K bonus paid in late May (2018). Whether this is better than funding the LISA at the end of the tax year (which is also an option which would pay a full bonus) depends on various factors, such as when you'd be buying and what else you'd plan to do with the money in the mean time, given that Skipton's paltry 0.75% interest isn't hard to beat....

The 0.75 is low ...

But considering people who have transferred HtB ISAs in and then maxing out this tax years 4K allowance... Such as myself ... Hypothetically, chucking another 4K in early on in the 18/19 tax year ; then 0.75% on this lump sum (say 8K minimum) soon stacks up, no ?

I'm already trying to think ahead whether my *spare* funds would be best placed in a product like a 5% regular saver (where the max deposit is £200pcm) for another year or chucking that 2nd 4K at the LISA and earning 0.75 on the lot ASAP in the new tax year ?!?

Any ideas

Buckets86

Buckets86 wrote: »

Hello,


I am looking to buy somewhere as soon as possible this year, and currently have a Santander HTB ISA and a Nutmeg LISA, opened in April 2017 with the minimum £100.


There are 2 things I'm unclear about at the moment:


1. Should I switch my Nutmeg S&S LISA to a Skipton Cash one now? Or is it not worth it for a few months? From what I've read above, this wouldn't 'stop the clock' which started when I opened the Nutmeg LISA. I obviously also need to transfer my HTB ISA in too (by the end of Feb if I switch to Skipton).
2. When should I start looking seriously/when can I realistically put in an offer on a property? From what I've read, the bonus won't be added until a few weeks after I've had the LISA open for a year, ie. mid/late April.


Thank you in advance!

Following my post above, I noticed on the Skipton website that you can only pay into one Lifetime ISA in each tax year. As I have already paid into the Nutmeg LISA this year (albeit only £100), does this therefore mean that I would have to top it up to the max value (ie. £4,000 less contributions into HTB ISA since 5 April 2017) BEFORE transferring to the Skipton one?


I obviously want to get this right before I start moving things around, and the Skipton deadline is fast approaching!


Thank you all in advance :-)

Alexland

lpyy wrote: »

I hold both cash & HTB ISA with NW and thinking to transfer the HTB to Skipton soon. I did not make any payments to the cash ISA last year apart from the interest earned & a credit transaction on 06 April 2017 due to payment made on 05 April 2017 night. I remember the last time I checked the account I was able to see what it is my current year ISA remaining balance and if I remember correctly NW did not deduct the 06 April 2017 payment from my annual ISA allowance so hopefully it is still treated as payment made in tax year 2016-2017 (strangely when I checked the website today again I can no longer see this infor..?).

I was just wondering in my case would there be any problem to transfer out the H2B and leave the Cash ISA active until further instructions.

Sorry for the delay replying I fell a bit behind.

Ok so I think you are saying you have not contributed to the Cash ISA this tax year and you believe Nationwide have treated the 5th April contribution (before midnight?) as last tax year in which case you should be fine to switch your HTB ISA to a LISA and leave your old Cash ISA behind to continue to accumulate interest.

Alex