Lifetime ISAs guide

leitmotif

masonic wrote: »

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.

It's an option, but one major thing holding us back from doing that is we have had to fight to get my autistic daughter the support and expertise she needs. Plus house prices are superinflated everywhere, and even if it's slightly less bad in out-of the-way areas, it'll surely be those areas that suffer worst if there's a downturn due to Brexit. Which makes moving to a country where house prices are sensible far more appealing, particularly if the healthcare system is superior to the NHS and my daughter and I can get better treatment.

The crazy thing is that my deposit is more than three and a half times the average annual gross salary, and yet I find myself in this position. It makes me so angry.

masonic

leitmotif wrote: »

Plus house prices are superinflated everywhere, and even if it's slightly less bad in out-of the-way areas, it'll surely be those areas that suffer worst if there's a downturn due to Brexit.

I disagree with this point. There are a lot of areas of the UK where house prices are not superinflated and in those areas a downturn would not cause much of a fall relative to the places where they are on ridiculous earnings multiples.

However, I can't argue against the case for leaving the UK if it is within the realms of possibility for you. I would be quite tempted to do so myself if I weren't geographically restricted by work opportunities.

Edit: If leaving Edinburgh is a problem for you, it even looks like there are some cheaper (<£100k) properties available in the surrounding area (within 5 miles), so you could probably even continue your daughter's current care/treatment arrangements.

leitmotif

masonic wrote: »

If leaving Edinburgh is a problem for you, it even looks like there are some cheaper (<£100k) properties available in the surrounding area (within 5 miles), so you could probably even continue your daughter's current care/treatment arrangements.

I'm in the south-east of England, in a city. A two-up two-down terraced house with almost no garden here is around £220K. I work from home and would rather buy a house with an extra bedroom than spend £8K a year renting an office (which would also mean I would no longer be able to write down a sizeable proportion of my rent, bills and council tax as business expenses). I grew up without grandparents, and am keen for my kids to have grandparents nearby (currently less than five miles away), not least because there are times when we desperately need the help. Neither am I keen to leave my country and my language (though I do speak two other European languages to a pretty high standard, and a third I’m conversant in). It'll be a tough decision. A lot of my money is in euros already (from before the Referendum). Because it's such an emotional decision, and because I think my daughter would really struggle being hundreds of miles from her grandparents, we've decided to see what Brexit brings. My partner is a non-British EU national anyway, so we'll still have freedom of movement come what may.

masonic

leitmotif wrote: »

I'm in the south-east of England, in a city. A two-up two-down terraced house with almost no garden here is around £220K.

You might want to update/remove your location in your profile then. It's a bit confusing when it states you live in Edinburgh. You probably won't find affordable housing within any reasonable distance of where you are currently, so it seems you face a tough choice. Although with what you are able to borrow and your savings, a property crash in the next few years could give you the opportunity you need.

Ed-1

masonic wrote: »

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.

No I'm not in agreement. I don't know how you're seeing that interpretation.

The above regulation I quoted is not a current year payment into the LISA. So the "plus accrued interest" (note the important bit: this doesn't have to have been accrued by 5th April) is also not a current year payment, therefore won't come out of the £4k.

EXAMPLE:

Interest paid on H2B ISA on 1st March 2017. Balance of H2B ISA at 5th April 2017 is say £4,500.

No further contributions to the H2B ISA are made in 17/18.

Interest paid on H2B ISA on 1st March 2018.

The full H2B balance at 5th April (i.e. the £4,500) plus the accrued interest paid on 1st March 2018 can be transferred across to a LISA by 6th April 2018 without affecting the £4k LISA limit.

If the transfer was requested before the interest was paid on 1st March 2018, the accrued interest could still be transferred across to LISA without affecting the LISA limit.

masonic

Ed-1 wrote: »

No I'm not in agreement. I don't know how you're seeing that 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."

That could be interpreted as

Either:
1) "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 as at 5th April 2017".

Or:
2) "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 at the point of transfer".

It would have been helpful if the regulations could have specified, which, since interest will continue to accrue after 5th April 2017.

The above regulation I quoted is not a current year payment into the LISA. So the "plus accrued interest" (note the important bit: this doesn't have to have been accrued by 5th April) is also not a current year payment, therefore won't come out of the £4k.

EXAMPLE:

Interest paid on H2B ISA on 1st March 2017. Balance of H2B ISA at 5th April 2017 is say £4,500.

No further contributions to the H2B ISA are made in 17/18.

Interest paid on H2B ISA on 1st March 2018.

The full H2B balance at 5th April (i.e. the £4,500) plus the accrued interest paid on 1st March 2018 can be transferred across to a LISA by 6th April 2018 without affecting the £4k LISA limit.

Hopefully a worked example like this one will be included in the new guidance notes, because the presence of the word "accrued" appears to be limiting, but it is unclear how limiting it is.

Your worked example would also need to account for closing interest (that which has accrued between 1st March 2018 and the transfer date), which, if I understand you correctly, you think would need to be counted as a new subscription to the LISA?

If the transfer was requested before the interest was paid on 1st March 2018, the accrued interest could still be transferred across to LISA without affecting the LISA limit.

So, a transfer requested after 1st March 2018 would, in your view, result in the interest payment being treated as a new subscription, even though some of it had accrued before the start of the current tax year?

So your interpretation seems to be:
3) "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 that has not been paid by the time the transfer was requested, with the exception of interest accrued after the first interest payment of the year 2017-18".

So, if I opened my HTB ISA on 7th April 2016 and my first interest payment was received on 6th April 2017, all of my interest would need to be deducted from my £4000 allowance? (this is the likely scenario I will actually face)

If I'm understanding you correctly, I find this interpretation the least plausible of the three.

george4064

Im not endorsing HL at all, but they do have a good HTB ISA/LISA guide here: https://www.hl.co.uk/investment-services/lifetime-isa

masonic

george4064 wrote: »

Im not endorsing HL at all, but they do have a good HTB ISA/LISA guide here: https://www.hl.co.uk/investment-services/lifetime-isa

They haven't really dealt with the issue of interest at all, but going purely on what they have stated in that guide it is in accord with my option (1).

Ed-1

masonic 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."

That could be interpreted as

Either:
1) "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 as at 5th April 2017".

Or:
2) "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 at the point of transfer".

It would have been helpful if the regulations could have specified, which, since interest will continue to accrue after 5th April 2017.


Hopefully a worked example like this one will be included in the new guidance notes, because the presence of the word "accrued" appears to be limiting, but it is unclear how limiting it is.

Your worked example would also need to account for closing interest (that which has accrued between 1st March 2018 and the transfer date), which, if I understand you correctly, you think would need to be counted as a new subscription to the LISA?


So, a transfer requested after 1st March 2018 would, in your view, result in the interest payment being treated as a new subscription, even though some of it had accrued before the start of the current tax year?

So your interpretation seems to be:
3) "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 that has not been paid by the time the transfer was requested, with the exception of interest accrued after the first interest payment of the year 2017-18".

So, if I opened my HTB ISA on 7th April 2016 and my first interest payment was received on 6th April 2017, all of my interest would need to be deducted from my £4000 allowance? (this is the likely scenario I will actually face)

If I'm understanding you correctly, I find this interpretation the least plausible of the three.

No you're not understanding me correctly. You're over-complicating it even though I could have expressed it more elegently.

Basically my interpretation which must be the right one is your number 2. All interest accrued/paid at the point of clisure/transfer of the H2B ISA is not treated as a new subscription and therefore should not count against the LISA limit.

masonic

Ed-1 wrote: »

No you're not understanding me correctly. You're over-complicating it even though I could have expressed it more elegently.

Basically my interpretation which must be the right one is your number 2. All interest accrued/paid at the point of clisure/transfer of the H2B ISA is not treated as a new subscription and therefore should not count against the LISA limit.

Ok, good. That's what I want the answer to be and what it seems it should be based on the general principles of ISA transfers.