Lifetime ISAs guide

masonic

Agius wrote: »

Hi, looking to open a lifetime ISA to use bonus towards house purchase, looking to buy in 12 months time when I have further years self-employed accounts for mortgage application purposes, is there any benefit in opening a LISA before 6th April with 4K lump sum then further 4K on 6th April. Have invested no more than 10k in a cash ISA to date this tax year. Thanks in advance for any advice.

Is there any advantage vs. what? Just putting in the £4000 on 6th April? If you do as you suggest rather opening the LISA later / paying in less, then your final balance will be £10,000 +interest instead of £5,000 +interest in a years time. Most people would see that as a benefit.

badger09

Agius wrote: »

Hi, looking to open a lifetime ISA to use bonus towards house purchase, looking to buy in 12 months time when I have further years self-employed accounts for mortgage application purposes, is there any benefit in opening a LISA before 6th April with 4K lump sum then further 4K on 6th April. Have invested no more than 10k in a cash ISA to date this tax year. Thanks in advance for any advice.

Of course there is. You'll qualify for 2 x £1000 bonus:cool:

Just be aware it needs to be open for a year or more to be able to use it for house purchase, and there are and property must cost less than £450k.

Agius

masonic wrote: »

Is there any advantage vs. what? Just putting in the £4000 on 6th April? If you do as you suggest rather opening the LISA later / paying in less, then your final balance will be £10,000 +interest instead of £5,000 +interest in a years time. Most people would see that as a benefit.

So I would qualify for the full 2018/19 bonus even though I’m investing the 4K lump sum in the last few days of the tax year? That’s what I was referring to as an advantage in my original question sorry I could have worded it better.

Agius

badger09 wrote: »

Of course there is. You'll qualify for 2 x £1000 bonus:cool:

Just be aware it needs to be open for a year or more to be able to use it for house purchase, and there are and property must cost less than £450k.

So when would I be able to use the full 10k towards house purchase without incurring a penalty 12 or 24 months?

masonic

Agius wrote: »

So I would qualify for the full 2018/19 bonus even though I’m investing the 4K lump sum in the last few days of the tax year? That’s what I was referring to as an advantage in my original question sorry I could have worded it better.

Yes, you get a 25% bonus on any money you pay in, 1-2 months after it is paid in.

Agius wrote: »

So when would I be able to use the full 10k towards house purchase without incurring a penalty 12 or 24 months?

The account must have been open for 12 months.

EHK

Can you help me figure out whether I should invest into LISA?

Month 0 (start): let's say I put in £4k now and after 5/6th April another £4k giving me total of £8k. 25% bonus is added monthly, so with the interest as well (i.e. 1.1%) how much total balance would I have in Month 1, then in Month 2 and so on until 3 years later where I'm at a point to either buy a house or have a complete change of circumstances and take out balance with PENALTY. Basically I want to know how much I can loose in worst case scenario, I'm willing to risk but want to know approximate calculations.

eskbanker

EHK wrote: »

Can you help me figure out whether I should invest into LISA?

Month 0 (start): let's say I put in £4k now and after 5/6th April another £4k giving me total of £8k. 25% bonus is added monthly, so with the interest as well (i.e. 1.1%) how much total balance would I have in Month 1, then in Month 2 and so on until 3 years later where I'm at a point to either buy a house or have a complete change of circumstances and take out balance with PENALTY. Basically I want to know how much I can loose in worst case scenario, I'm willing to risk but want to know approximate calculations.

If it's just approximate figures you're looking for then I'd ignore the practically negligible interest and just focus on the bonuses, which aren't literally applied every month but only in months after each contribution! If you pay in £4K now then that will have become £5K by late May or early June, and adding another £4K in 2019/20 would take the total to £10K shortly afterwards. If you pay in another £4K during 2020/21 you'd have £15K (plus shrapnel) at the end of that tax year and likewise £20K by 2021/22.

If you withdraw other than for a property purchase (and before age 60) then the 25% penalty applies to the amount withdrawn, so that's effectively deducting all the bonus and also 6.25% of what you'd originally paid in (with a minor adjustment for interest).

EHK

eskbanker wrote: »

If it's just approximate figures you're looking for then I'd ignore the practically negligible interest and just focus on the bonuses, which aren't literally applied every month but only in months after each contribution! If you pay in £4K now then that will have become £5K by late May or early June, and adding another £4K in 2019/20 would take the total to £10K shortly afterwards. If you pay in another £4K during 2020/21 you'd have £15K (plus shrapnel) at the end of that tax year and likewise £20K by 2021/22.

If you withdraw other than for a property purchase (and before age 60) then the 25% penalty applies to the amount withdrawn, so that's effectively deducting all the bonus and also 6.25% of what you'd originally paid in (with a minor adjustment for interest).

Got it, so in simple calculations, if I pay in £20k I would get £25k total balance and loose £6250 in penalty (loose all bonus £5k and £1250 from what I paid).

If I look at this in terms of how much of my own money I would loose, it's not a huge tragedy, a bit shame to loose all the bonuses but that's the risk anyway.

Thanks, that's all I needed to know

LandOfConfusion

Hi all,


I'm going to be sinking £4k into my existing LISA on or shortly after the 6th April this year but just wanted one thing clarified.


They way the Key Facts & other documentation is worded suggests that unlike in the previous year the bonus is going to be amortized, i.e. paid gradually over many months. Is this actually the case or will my immediate investment of £4k result in the full £1k bonus being credited as a lump sum in May/June?

eskbanker

LandOfConfusion wrote: »

I'm going to be sinking £4k into my existing LISA on or shortly after the 6th April this year but just wanted one thing clarified.


They way the Key Facts & other documentation is worded suggests that unlike in the previous year the bonus is going to be amortized, i.e. paid gradually over many months. Is this actually the case or will my immediate investment of £4k result in the full £1k bonus being credited as a lump sum in May/June?

There's no amortisation involved, bonuses are paid in full shortly after the relevant contributions are made. It's been like that throughout the 2018/19 year too, so perhaps you're seeing something clumsily explaining the change from the one-off arrangements that applied in the first year of operation in 2017/18?

And if you're using a cash LISA rather than a S&S one, you'd probably find it worthwhile to keep your £4K somewhere else until the end of the 2019/20 tax year (or shortly before being needed, if sooner), as it's not difficult to beat the derisory interest rates offered on cash LISAs....