Lifetime ISAs guide

DeanMB

Apologies if I'm asking the obvious but the HTB/LISA transfer is confusing me a bit. I've read the MSE guidance and I feel that rule 4 applies best to my situation as I don't know when I'll be buying.

Rule no. 4 – Unsure when you’ll buy? Max out a Help to Buy ISA and put £1 in a LISA. Again, there’s a schedule to follow to max this out…
– Open a top Help to Buy ISA now and save to the max in it.
– On 6 April 2017 open a LISA with only £1. That way the clock has started on the ‘you must have held it a year’ rule.
– If you’ve more savings to put away, use normal top savings accounts.
– Buy before April 2018? Just use the Help to Buy ISA (as you can’t use the LISA until you’ve had it a year). And accept you’ve £1 locked in the LISA (or withdraw it and pay the penalty).
– In March 2018 (before the tax year ends) if you’re not close to buying, transfer the Help to Buy ISA into the LISA. And also take any money out of normal savings to put in the LISA up to £1,600 (the LISA limit minus £2,400 – a year’s maximum Help to Buy contributions). This way you’ll have maxed out your contributions for when you buy (if you aren’t convinced you’ll definitely buy at some point, stick with a Help to Buy ISA, it’s safer).

The way that I'm reading this leads me to believe that I'm able to pay into both my existing HTB ISA (maxed out 16/17, no deposits 17/18) AND deposit £1 into a LISA - is this correct?

If so, am I able to transfer mid-year and begin paying into my LISA if I wish to do so?

David43

Hi, I am just trying to get my head around the LISA / H2B ISA, so apologies if these questions have been asked many times -

I opened a H2B ISA last tax year and deposited a total of £3400, and received some interest on 7-April, taking the total to £3,487.99.

Can I continue to contribute £200/ month into the H2B ISA this tax year, and still open/contribute to a LISA later this tax year? (As i thought you could only contribute to one ISA per tax year).

If I then move my H2B balance over to a LISA, am I right i saying that the £3400 contributed to the H2B ISA last tax year will not form part of this year's LISA allowance, but the interest I received on 7-April and any new H2B contributions/interest this tax year will form part of this year's LISA allowance?.

Also, will I get a 25% bonus on the total H2B ISA transfer amount (contribution + interest), or is it only on the contribution part?

Thanks in advance.

masonic

DeanMB wrote: »

The way that I'm reading this leads me to believe that I'm able to pay into both my existing HTB ISA (maxed out 16/17, no deposits 17/18) AND deposit £1 into a LISA - is this correct?

If so, am I able to transfer mid-year and begin paying into my LISA if I wish to do so?

Yes and yes.

David43 wrote: »

Can I continue to contribute £200/ month into the H2B ISA this tax year, and still open/contribute to a LISA later this tax year? (As i thought you could only contribute to one ISA per tax year).

If I then move my H2B balance over to a LISA, am I right i saying that the £3400 contributed to the H2B ISA last tax year will not form part of this year's LISA allowance, but the interest I received on 7-April and any new H2B contributions/interest this tax year will form part of this year's LISA allowance?.

Also, will I get a 25% bonus on the total H2B ISA transfer amount (contribution + interest), or is it only on the contribution part?

You can contribute to one ISA of each type per tax year. The HTB ISA (which is a cash ISA) and LISA are different types of ISA, so you can contribute to both.

Anything you pay into the HTB ISA this tax year will come out of the LISA allowance, if transferred. Interest will not. You'll get the bonus on the total amount transferred.

DeanMB

masonic wrote: »

Yes and yes.


You can contribute to one ISA of each type per tax year. The HTB ISA (which is a cash ISA) and LISA are different types of ISA, so you can contribute to both.

Anything you pay into the HTB ISA this tax year will come out of the LISA allowance, if transferred. Interest will not. You'll get the bonus on the total amount transferred.

Thanks for clearing that up Masonic, I wasn't aware that the HTB ISA counted as a cash ISA.

Am I right to think that I don't actually have to invest anything that I deposit into a S&S LISA in order to receive the bonus? I would have my savings sat in the LISA uninvested in order to take advantage of the state contribution than risk a decrease in value.

EDIT: Done a bit more reading, the below seems to confirm this.

Lowest risk fund: Share Centre says there is a 'cash park' while you're deciding which fund to pick, so you could leave money in that, if you wish to, though you won't get interest. Otherwise, the "Cautious" fund has the least risk.

Caluke

I currently have an only one ISA which is a HTB with £1800 in it. I intend to buy a house in around 15 months’ time. I have £7k in savings and I could to save a further £200 per month (£2400 per annum) in the HTB over the next 12 months
.
From the information given in this forum and in articles on the site appears to indicate that I can open a LISA now and save in this and then transfer the HTB ISA into this before 5th April 2018 and receive the 25% bonus on the sum in the HTB before 5th April 2017 (i.e. £1800) and 25% bonus on the amount that i have deposited in the LISA.

Therefore, if I save £4k in the LISA starting April 2017 up to 5th April 2018, and transfer my HTB into the LISA before 5th April 2018, on buying my first house, say in May 2018, will receive the 25% bonus on £5800?

If this is the position I will not benefit from saving any further in the HTB or I could add a further £2400 into the HTB over the next 12 months and £1600 into the LISA and Transfer the HTB into the LISA before 5th April 2018?

In the above scenario I am assuming that I don’t have to put money the £1,800 into the LISA during April 2017 to get the 25% bonus in April 2018 and I could open LISA now with say £100 and deposit the £1,700 in March 2018?

Is this the best scenario where I can receive the maximum bonus?

If this is not the case how much can I save in the LISA and THB up to 5th April 2018 and get the maximum bonus 25%bonus after 12 months?

How long should allow for a transfer from a HTB into LISA?

If I deposit £4k into the LISA in one single payment after 5th April 2018 and if I buy a house say 3 months later would I receive a further bonus of £250 (i.e 6.25% or 3 in12 of 25% bonus on the 4k)?

masonic

Caluke wrote: »

Therefore, if I save £4k in the LISA starting April 2017 up to 5th April 2018, and transfer my HTB into the LISA before 5th April 2018, on buying my first house, say in May 2018, will receive the 25% bonus on £5800?

Yes

If this is the position I will not benefit from saving any further in the HTB or I could add a further £2400 into the HTB over the next 12 months and £1600 into the LISA and Transfer the HTB into the LISA before 5th April 2018?

Yes, you could do that instead.

In the above scenario I am assuming that I don’t have to put money the £1,800 into the LISA during April 2017 to get the 25% bonus in April 2018 and I could open LISA now with say £100 and deposit the £1,700 in March 2018?

Yes, and it would probably be sensible to do just that unless a provider comes along who is willing to pay a decent rate of interest on cash in a LISA.

Is this the best scenario where I can receive the maximum bonus?

The bonus will be pretty much the same for both scenarios.

How long should allow for a transfer from a HTB into LISA?

It depends when you do it. I imagine there will be a lot of transfers taking place during March 2018, so you might wish to do it a little before then.

If I deposit £4k into the LISA in one single payment after 5th April 2018 and if I buy a house say 3 months later would I receive a further bonus of £250 (i.e 6.25% or 3 in12 of 25% bonus on the 4k)?

You would receive the full £1000 bonus during May 2018.

Caluke

Masonic- thank you for the prompt response- I have one further query in relation to my last question which was

If I deposit £4k into the LISA in one single payment after 5th April 2018 and if I buy a house say 3 months later would I receive a further bonus of £250 (i.e 6.25% or 3 in 12 of 25% bonus on the 4k)?

Your response was that I would receive the full £1000 bonus during May 2018.

Are you sure that the bonus is not paid on a monthly pro-rata basis ? It seems too good to be true.

masonic

Caluke wrote: »

Are you sure that the bonus is not paid on a monthly pro-rata basis ? It seems too good to be true.

From April 2018, the bonus is paid in the month after the deposit is made. The bonus is in lieu of tax relief, which you would get even more quickly if contributing to a pension. If they wanted to pro-rata it, then you'd be getting about 1% per year until you reached 60. Instead you get 25% in one go, then nothing else from the Government on those funds.

tg99

I'm thinking I may as well open LISA with HL now (as want stocks and shares rather than cash; want to make my own choice of fund / stock thus ruling out Nutmeg and Sharecentre) as 0.45% fee in year 1 and £25 transfer out fee probably made up by tax saving on the dividend. Then transfer out to hopefully one of the flat fee / no annual fee providers. May also be able to get new provider to pay transfer fees from HL / might offer cashback on transfers. That said, also £25 + VAT account closure fee at HL which I'm assuming is in addition to the transfer out fee - anyone with HL able to confirm / know any clever ways to avoid these fees? (Think could leave £50 of stock/funds in the account thus not falling below their £50 minimum hence avoiding £25 + VAT closure fee for example.)

masonic

tg99 wrote: »

I'm thinking I may as well open LISA with HL now (as want stocks and shares rather than cash; want to make my own choice of fund / stock thus ruling out Nutmeg and Sharecentre) as 0.45% fee in year 1 and £25 transfer out fee probably made up by tax saving on the dividend. Then transfer out to hopefully one of the flat fee / no annual fee providers. May also be able to get new provider to pay transfer fees from HL / might offer cashback on transfers. That said, also £25 + VAT account closure fee at HL which I'm assuming is in addition to the transfer out fee - anyone with HL able to confirm / know any clever ways to avoid these fees? (Think could leave £50 of stock/funds in the account thus not falling below their £50 minimum hence avoiding £25 + VAT closure fee for example.)

If you invest in investment trusts and ETFs, and don't trade often, HL can be competitive on larger balances. There is no such thing as a partial transfer for a LISA, so I see no way of avoiding the closure fee if you want to transfer elsewhere.