Lifetime ISAs guide

TheTrotsky

masonic said:

TheTrotsky said:

Hi, Can anybody explain why the Unity Mutual LISA is not mentioned on MSE? The Unity Mutual LISA is currently offering 1.5% per annum (the same as last year). I've tried contacting MSE on at least two occasions in the past to try and highlight this LISA without response or acknowledgement. Am I missing something obvious? Thanks

https://forums.moneysavingexpert.com/discussion/6152061/unity-mutual-lisa

Thanks for the pointer. I've responded on the other thread.

curtis1222

Hi new to the forum,

I’m currently in a situation where I’m not sure whether to transfer my HTB ISA to a LISA.

I’m 24 and looking to buy my first property in the next 1-2 years. I have £5,500 saved in the HTB ISA, as well as £6,500 in a stocks and shares ISA.

I understand that the LISA has a higher limit of £4,000 a year for deposits, which then would mean a higher government bonus.

Am I correct in thinking that I can only transfer £4,000 into the LISA per tax year? This would then mean that there is no advantage in transferring from my HTB ISA because if I buy within the first TAX year id have more bonus from the HTB, and in the second tax year I would have deposited another £2,000 so would have a balance of £3,500 in the HTB. Leaving only £1,500 extra to transfer into the LISA in that tax year which would be less than the £2,400 max annual contribution allowed in the HTB ISA.

 

I think I may have answered my own question in writing this, it would only be viable if I was to wait for 3 tax years and I would be able to save an additional £1,600 in the LISA meaning an extra bonus of £400

 

Is this the most efficient way to save money for a house?

Thanks, Curtis

 

masonic

curtis1222 said:

I’m 24 and looking to buy my first property in the next 1-2 years. I have £5,500 saved in the HTB ISA, as well as £6,500 in a stocks and shares ISA.

Are you intending to use the money in your S&S ISA towards your house purchase? Because if so you are risking it being worth less when you buy than it is now.

curtis1222 said:

Am I correct in thinking that I can only transfer £4,000 into the LISA per tax year? This would then mean that there is no advantage in transferring from my HTB ISA because if I buy within the first TAX year id have more bonus from the HTB

Yes, you can transfer/pay a maximum of £4k into a LISA per tax year. It's worse than you state if you buy within the first tax year because you'll have zero bonus from the LISA. A LISA must be open for a minimum of 1 calendar year before you can make a penalty free withdrawal. If the penalty is increased back to 25% from the current temporary level of 20%, you would get back less than you pay in.

curtis1222 said:

and in the second tax year I would have deposited another £2,000 so would have a balance of £3,500 in the HTB. Leaving only £1,500 extra to transfer into the LISA in that tax year which would be less than the £2,400 max annual contribution allowed in the HTB ISA.

Again, worse than you state - if you transfer £3,500 to the LISA then you could only pay in another £500. Plus you'd have to wait a minimum of 2 months before completing your purchase to avoid paying a penalty on the LISA withdrawal. At that point you could have had £100 more in the HTB ISA than the LISA.

curtis1222 said:

I think I may have answered my own question in writing this, it would only be viable if I was to wait for 3 tax years and I would be able to save an additional £1,600 in the LISA meaning an extra bonus of £400

Yes, or if you purchase a home worth more than £250k outside of London in which case the purchase would not be eligible for a HTB ISA bonus claim, but it could be if you used the LISA. If you are confident the property you will buy will be within the HTB ISA limits and you are confident you will buy in the time-frame you suggest, then there is little point in trying to switch over to a LISA at this time.

grumiofoundation

curtis1222 said:

Hi new to the forum,

I’m currently in a situation where I’m not sure whether to transfer my HTB ISA to a LISA.

I’m 24 and looking to buy my first property in the next 1-2 years. I have £5,500 saved in the HTB ISA, as well as £6,500 in a stocks and shares ISA.

I understand that the LISA has a higher limit of £4,000 a year for deposits, which then would mean a higher government bonus.

Am I correct in thinking that I can only transfer £4,000 into the LISA per tax year? This would then mean that there is no advantage in transferring from my HTB ISA because if I buy within the first TAX year id have more bonus from the HTB, and in the second tax year I would have deposited another £2,000 so would have a balance of £3,500 in the HTB. Leaving only £1,500 extra to transfer into the LISA in that tax year which would be less than the £2,400 max annual contribution allowed in the HTB ISA.

 

I think I may have answered my own question in writing this, it would only be viable if I was to wait for 3 tax years and I would be able to save an additional £1,600 in the LISA meaning an extra bonus of £400

 

Is this the most efficient way to save money for a house?

Thanks, Curtis

 

Other thing to consider is Lifetime ISA has an upper limit of 450,000 whereas HTB is 250,000 if outside London (450,000 win London)  - if this will be a factor?

With the amount to have saved in HTB ISA as you say bonus will be very similar over next year or so.

Short answer -
if going to buy in 12 months time LISA = HTB.
12-22 months (i. e. before April 2022) HTB > LISA
After April 2022 LISA > HTB.


As an aside if you are looking to buy in next 1-2 years and will need the money in the Stocks and Shares ISA to go towards your deposit you might want to look at moving that to cash to remove the risk of it going down in value. 

curtis1222

Thanks, Masonic,

I think it’s really cleared it up for me a LISA wouldn’t be suitable for my circumstances. I’m not looking to spend big money on a house. I’m hoping to buy a smaller place and pay the mortgage sooner. I forgot about the minimum 12months the account has to be open for, I believe there was a window to transfer but obviously I missed that.

 

With regards to the S&S ISA, this is also going to be used as my deposit I’ve only recently put money into this and am hoping to make the most of the market crash, but that’s a separate discussion

 

Curtis

masonic

curtis1222 said:

With regards to the S&S ISA, this is also going to be used as my deposit I’ve only recently put money into this and am hoping to make the most of the market crash, but that’s a separate discussion

Hopefully you've already done well out of that. From here, I think there is very limited upside to be had and quite a considerable downside risk. The US market is within a whisker of its all time high, while there are non-Covid reasons why the UK market is depressed and will probably continue to be for the foreseeable future. For a long-term investor, the advice is always do nothing as the long term direction is almost certainly upward, but for someone who needs the money in the short term, it is not a gamble I'd take.

curtis1222

Sorry didnt see this before I posted, the 250k limit shouldnt be an issue. Ill review my stocks on monday and see how I feel about them. Thanks for your advice everyone

charlotteLBM245

I currently have an ISA and a LISA. 

I am looking at buying a property to rent (with my current work situation if I were to buy a property to live in, I would never actually get to live in it as I work away a lot and would just be paying for an empty house). 

Where do I stand with the LISA? I understand that I would not be able to use it to purchase a property to rent, but would I still be able to use it after to buy my first home that I intend to live it. Or would me having a property that I rent, class as my first home and make me unable to use my Lisa for a house?
hope that makes sense!

grumiofoundation

charlotteLBM245 said:

I currently have an ISA and a LISA. 

I am looking at buying a property to rent (with my current work situation if I were to buy a property to live in, I would never actually get to live in it as I work away a lot and would just be paying for an empty house). 

Where do I stand with the LISA? I understand that I would not be able to use it to purchase a property to rent, but would I still be able to use it after to buy my first home that I intend to live it. Or would me having a property that I rent, class as my first home and make me unable to use my Lisa for a house?
hope that makes sense!

You have to be a first time buyer to use the LISA for a house purchase. If you own another property you are not a first time buyer. 

Sian1964

Hi all. ADVICE NEEDED. 

I took the advice of this website to set up a lifetime isa last year with MoneyBox. I set one up on the 8th September 2019 and deposited £1.00 into the account. Before the end of tax year 19/20 I deposited £3,000 in there to get some bonus money before the new tax year. The bonus wasn’t coming into the account and therefore I emailed why and they said my account wasn’t fully set up and that they required other information and then said I wouldn’t receive last years bonus money baring in mind I deposited the money before tax year. Moneybox did not notify me of this, I have email trials to state my lifetime isa was set up on the 8th September 2019. I have a bank statement to state that £1.00 was taken out of my account on the 8th Sept 2019, and the money in my moneybox states £3001.00 which proves I put £1.00 extra in. Can I some advice on what to do? As I’m also worried that my 12 months would mean it would be next year that I can use the money for a first time home and not September when we have budgeted for that. Joe from Moneybox has said that they cannot change the open date, and can’t give me the bonus money. I’m fuming and upset about it really as I’ve done everything they have asked me to, what shall I do?