Lifetime ISAs guide

Ed-1

bowlhead99 wrote: »

The standard transfer history documentation that accompanies the cash movement from one sending ISA manager to another receiving ISA manager confirms how much current year subscription has been made.

If the answer is that no 'current year' (2017/8) subscription has been made, then the receiving manager knows you have £4000 of contributions you could make direct to the LISA. If the document shows that £1000 of current year (2017/8) contributions are included within the total transfer value, the receiving LISA manager knows you can only make £3000 more direct to him.

During the HMRC consultation on the draft regulations I actually questioned the need to stipulate the H2B ISA balance as of 5th April as the definitive amount that can be transferred across to LISA (rather than previous year subscriptions) as this excludes accrued interest that may be paid after 5th April 2017. I see they have added 'plus accrued interest' to the final regulations to facilitate the transfer of interest as well.

Thinking about it, knowing that an account holder has made no current year (17/18) subscriptions into the H2B ISA does not tell the LISA provider that they have a full £4000 LISA limit left (or how much to reduce it by). This is because previous year subscriptions can be transferred across from another cash ISA into the H2B ISA to fund it on a monthly basis during 17/18. No current year (new money) subscriptions have been made yet the LISA allowance still needs reducing by the amount of previous year money transferred into the H2B ISA post 5th April 2017. So the LISA provider explicitly needs to know the balance of the H2B ISA on 5th April 2017 (plus accrued interest) to know how much LISA allowance remains which explains why the regulations are phrased to require exactly that.

bowlhead99

Yes, no argument with that; my comments above were a simplification, to basically explain "how would they know; where is the solid evidence you could give me on how it works", as "well, here's a example of how they get the data, look it up at these references if you want chapter and verse"

You are right that for the £4000 limit it's the total additional non-HTB money introduced to a HTB during 2017/18 and later transferred to a LISA that they care about, not solely the "new money" that had previously come into the transferred HTB from a non-ISA bank account.

It's the same logic that says the £4000 limit is depleted by transfers direct into the LISA from normal cash ISAs or S&S ISAs or IF ISAs, rather than only being affected by the "brand new" contributions from normal bank accounts.

It is pretty easy to administer within the existing reporting structure because if a contribution made to a HTB would have reduced the effective 2017/18 HTB limit at the time it was made (those limits being the £1000 at opening and £200 pcm, which is something that is tracked during the transfer process anyway to ensure people don't double-dip when moving HTB providers) then it is true to say that the 2017/18 HTB contribution in question would also come out of the £4000 LISA limit when the HTB is later transferred to the LISA. Whether it was a contribution from a S&S ISA or IF ISA or Cash ISA, or a contribution from a normal bank account.

The only payment into a HTB ISA in 2017/18 which would not come out of the LISA limit when subsequently transferred to a LISA, would be a transfer from a previous HTB that only contained 2016/17 and prior subscriptions. Any 2017/18 additions to a HTB which impacted the HTB £1000+200pcm limit of that HTB, will also impact the 2017/18 LISA limit if that HTB subsequently gets moved into a LISA.

It gets complicated when you try to qualify every statement with all the small print but basically people should go and look up the small print if they want to be able to cover every permutation, and regurgitation of the entire legislation here is probably overkill

TheTink

Hopefully this is not a silly question.

Say you put £4,000 into Lifetime ISA in 2017/2018 Tax Year, then put another £4000 in 2018/2019 Tax Year buying your first property in January 2019 and using the Lifetime ISA balance for the purchase (which would include £2000 bonus across two tax years).

Would you be able to put £4,000 into a Lifetime ISA in 2019/2020 and subsequent Tax Years (receiving bonus upto age 50) with intention of withdrawing money when aged 60? Or can you withdraw a Lifetime ISA Balance only once - in above case to buy first property - and thereafter not benefit from this ISA?

Any thoughts would be much appreciated

Ed-1

TheTink wrote: »

Hopefully this is not a silly question.

Say you put £4,000 into Lifetime ISA in 2017/2018 Tax Year, then put another £4000 in 2018/2019 Tax Year buying your first property in January 2019 and using the Lifetime ISA balance for the purchase (which would include £2000 bonus across two tax years).

Would you be able to put £4,000 into a Lifetime ISA in 2019/2020 and subsequent Tax Years (receiving bonus upto age 50) with intention of withdrawing money when aged 60? Or can you withdraw a Lifetime ISA Balance only once - in above case to buy first property - and thereafter not benefit from this ISA?

Any thoughts would be much appreciated

It's a Lifetime ISA. If you could only withdraw from it once (a) it wouldn't be worth calling it a lifetime ISA and (b) there wouldn't need to be a withdrawal charge every time you withdraw for non-qualifying purposes.

Buying a first home and age 60 is just the start. The Treasury are open to adding in further qualifying life events in future from which you can withdraw charge-free from your LISA pot. They are also looking at flexibility like withdrawing without charge if the funds are later replaced.

masonic

Ed-1 wrote: »

During the HMRC consultation on the draft regulations I actually questioned the need to stipulate the H2B ISA balance as of 5th April as the definitive amount that can be transferred across to LISA (rather than previous year subscriptions) as this excludes accrued interest that may be paid after 5th April 2017. I see they have added 'plus accrued interest' to the final regulations to facilitate the transfer of interest as well.

It occurs to me that the "plus accrued interest" statement could be problematic. Does it mean accrued interest "as at 5th April 2017"?

If so, than any interest, accrued or paid into the HTB ISA, between 6th April 2017 and the date of the transfer will come out of the 2017/18 LISA allowance. This is likely to be an annoying amount of shrapnel that makes other calculations unnecessarily difficult. It also seems at odds with the general principles of ISA transfers.

I presume it can't be the correct interpretation.

leitmotif

masonic wrote: »

I assume you are in your 40s and have been saving for a house deposit for some years, yet you don't have enough saved up yet for a 10% deposit.

Yes, I’m 40 and have been saving for some years. I do have a very substantial deposit, but the banks won’t lend a substantial amount to me. This is for two reasons: 1) My partner can’t work, as we have an autistic child who needs a lot of care, so I’ve been the only breadwinner for years. Disability Living Allowance is a one-size-fits-all thing, and nice as it is to get it, it certainly doesn’t cover what she’d be earning if she could work. 2) I’ve worked so hard over the years, and have become so stressed and depressed over the house price issue, that I have burned out four times and I developed a problem with migraine (which affects me an awful lot, and is extremely debilitating), and so as a self-employed person I’ve struggled to keep a consistent track record. The most I saved was a few years ago - £18K. Then in other years I’ve lost money, given the cost of rent. So yes, my deposit (read: life savings) is probably edging towards six figures, but the banks will only lend me £70-80K. And so I keep slogging as best my health will allow, but when I see that house prices have risen another 8% in the past twelve months and I’ve only managed to save, say, two thirds of that extra money, it edges me back towards depression.

I hope that explains why we’re not even at the stage of thinking about pensions yet.

masonic wrote: »

A LISA therefore wouldn't really help you out on the property side of things, and as discussed above, it probably isn't the best option for you on the pensions side either.

Yes, quite likely. I think more drastic measures are needed anyway. If Brexit doesn’t bring about a more favourable situation, then we’re going to have to emigrate to a better country. The ‘solution’ of building more houses will take a decade or two to have any effect, and that’s only if they genuinely do build enough (track record isn’t great in that regard). There are enough houses, as I keep saying, otherwise we’d all be on the street. They could fix the housing crisis within 18 months by introducing regulations or legislation that made landlords want to sell.

masonic wrote: »

It seems pretty obvious that if house prices inflate, people who are owner occupiers still have a home worth '1 property' and the only way to make any financial gain is to downsize to a smaller property. It's the same story for those who are lucky enough to inherit a property, or a share in a property, which they use to fund their own move onto/up the property ladder. The winners are those who have multiple properties and the losers are those who have to buy a property from their wages.

Exactly. Cui bono? I have friends who didn’t go to uni and so bought a property in the late 90s. They are constantly harping on about how their house is earning more than them. But unless they sell it or release equity, they’re not really going to see those gains because they still have to live somewhere. Which makes the past 17 years of superinflation seem rather hollow. And I also have to endure watching a few acquaintances parading around like smart businessmen because they bought a few flats when the TV told them to in 2005, on 110% mortgages, and weren’t wiped out by a crash. As though they’re really clever and thought it through strategically.

lukaszjurys

so : transfer 4 k from HTB Isa to LISA after or on 6/4/17.
Pay in another 4 k before 5/4/18 and get 25% on 8 k savings ?

my question : what happen to bonus that I made since HTB Isa (got 4200 which is 800 GBP in gov bonus) ?

How to make it max investment ?

Ed-1

masonic wrote: »

It occurs to me that the "plus accrued interest" statement could be problematic. Does it mean accrued interest "as at 5th April 2017"?

If so, than any interest, accrued or paid into the HTB ISA, between 6th April 2017 and the date of the transfer will come out of the 2017/18 LISA allowance. This is likely to be an annoying amount of shrapnel that makes other calculations unnecessarily difficult. It also seems at odds with the general principles of ISA transfers.

I presume it can't be the correct interpretation.

The regulation states
The first or only transfer from a Help to Buy ISA (as described in regulation 5DDC(6)) to a Lifetime ISA in the year 2017-18 in an amount not exceeding the balance on the Help to Buy ISA as at 5th April 2017 plus accrued interest.

The balance of the H2B ISA as at 5th April includes any interest already credited so the "plus accrued interest" bit allows for any interest not credited (or accrued) as at 5th April to also be transferred without it affecting the LISA limit.

masonic

Ed-1 wrote: »

The regulation states
The first or only transfer from a Help to Buy ISA (as described in regulation 5DDC(6)) to a Lifetime ISA in the year 2017-18 in an amount not exceeding the balance on the Help to Buy ISA as at 5th April 2017 plus accrued interest.

The balance of the H2B ISA as at 5th April includes any interest already credited so the "plus accrued interest" bit allows for any interest not credited (or accrued) as at 5th April to also be transferred without it affecting the LISA limit.

So you are in agreement with me that interest accrued in the HTB ISA between 6th April and the date of transfer will need to be deducted from the £4000 LISA allowance (but not out of the £20k ISA allowance). That's going to be really annoying when working out what can be subscribed.

masonic

leitmotif wrote: »

Yes, I’m 40 and have been saving for some years. I do have a very substantial deposit, but the banks won’t lend a substantial amount to me. This is for two reasons: 1) My partner can’t work, as we have an autistic child who needs a lot of care, so I’ve been the only breadwinner for years. Disability Living Allowance is a one-size-fits-all thing, and nice as it is to get it, it certainly doesn’t cover what she’d be earning if she could work. 2) I’ve worked so hard over the years, and have become so stressed and depressed over the house price issue, that I have burned out four times and I developed a problem with migraine (which affects me an awful lot, and is extremely debilitating), and so as a self-employed person I’ve struggled to keep a consistent track record. The most I saved was a few years ago - £18K. Then in other years I’ve lost money, given the cost of rent. So yes, my deposit (read: life savings) is probably edging towards six figures, but the banks will only lend me £70-80K. And so I keep slogging as best my health will allow, but when I see that house prices have risen another 8% in the past twelve months and I’ve only managed to save, say, two thirds of that extra money, it edges me back towards depression.

I hope that explains why we’re not even at the stage of thinking about pensions yet.

You say you have a substantial 5 figure sum saved already and that you are self-employed, so could you relocate to a cheaper area of the UK? House prices where I live are much cheaper. A 3 bedroom house can be picked up for £80-100k (I'm discounting the more run down 'doer-uppers', which are even cheaper). There are lots of regions where housing would be affordable for you if your work situation would allow you to move. Since you would only need a small mortgage, you could put a fair chunk of the money you were paying on rent towards retirement, which I think will be very important for your future.