Lifetime ISAs guide

tg99

masonic wrote: »

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.

Yeah it's capped at £45pa for ETFs/IT/shares but would likely still work out cheaper longer term to transfer out even if paying the transfer / closure fees assuming at some stage over the next year or two there will be cheaper providers offering the LISA.

Would you not be able to do a partial transfer for a LISA after year one like you can do with a standard S&S ISA?

josephibbs93

isasmurf wrote: »

To open a LISA in March 2018 and withdraw from it in May 2018 will incur a 25% withdrawal charge. A LISA must be open for 1 year before a penalty free withdrawal for a house purchase can be made.

Thank you! In this case, I should open one at the earliest opportunity, deposit £1 to get the clock ticking, transfer my total HTB balance (which after the next 11 months will be £5600) into the LISA, and then add the £1600 to top up HTB/LISA contributions for this tax year?

masonic

tg99 wrote: »

Would you not be able to do a partial transfer for a LISA after year one like you can do with a standard S&S ISA?

Forget what I said about partial transfers, I mistakenly thought that, like HTB ISAs, you could only have one. However, that's incorrect and you can open one per tax year and partial transfers would be fine. I don't know if HL allows partial transfers out of its ISAs, but if they do, you could leave a sum behind to avoid the closure fee.

Judder01

masonic wrote: »

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.

I was wondering this too so thank you for answering the question. Do you have a link please confirming this? All I can officially find is that the bonus is paid monthly on contributions from the next tax year. I do believe you as I thought this was the case but I need to convince someone else!

masonic

Judder01 wrote: »

I was wondering this too so thank you for answering the question. Do you have a link please confirming this? All I can officially find is that the bonus is paid monthly on contributions from the next tax year. I do believe you as I thought this was the case but I need to convince someone else!

https://www.gov.uk/government/publications/guidance-notes-for-isa-managers

See paragraph 9B.23-26

Metalligator

Hi,
From what I gather I can pay into HTB and LISA, I have read back a few pages and seems to be the case.
I Have the max 11 months saved in my HTB (will have 12 by the end of the month) and when I log in it says the interest is 4% (Santander - I am getting them to confirm this).

If I wanted to buy next year would the best option to get the max bonus be carry on paying into my HTB this financial year, (which doesn't affect £4k for LISA?) start a £1 or whatever LISA and get £4k in there, by april, then next financial year after I've had my interest pay the HTB into the LISA, wait for at least the first month interest payment to get the bonus on everything and pay into LISA until I buy?

peter_333

Metalligator wrote: »

Hi,
From what I gather I can pay into HTB and LISA, I have read back a few pages and seems to be the case.
I Have the max 11 months saved in my HTB (will have 12 by the end of the month) and when I log in it says the interest is 4% (Santander - I am getting them to confirm this).

If I wanted to buy next year would the best option to get the max bonus be carry on paying into my HTB this financial year, (which doesn't affect £4k for LISA?) start a £1 or whatever LISA and get £4k in there, by april, then next financial year after I've had my interest pay the HTB into the LISA, wait for at least the first month interest payment to get the bonus on everything and pay into LISA until I buy?

The strategy many people seem to be working towards (which is also my reading of Martin Lewis' recommendation) is:
- Open a LISA today, with minimum £1 (or whatever the minimum is to open the account).
- Keep paying into your HTB at the maximum £200 per month (so you deposit £2400 in HTB this tax year).
- If you want, you can also top-up your LISA during the year. Aim to put £1600 total into the LISA during the tax year (drip-feeding, this would be £133 per month, but this could also be a lump-sum at any time during the tax year)
- In March 2018, transfer the full contents of the HTB account into the LISA. With the £2400 you've deposited in the HTB during the year and the £1600 you've put into the LISA, you'll have the £4000 deposit total for 2017/18 that is required to get the maximum LISA bonus.

In operating this way, you're benefitting from the healthy interest rate that Santander are giving on your HTB, while still getting the full LISA bonus at the end of the tax year, and you still get the full bonus for funds you transfer to the LISA that were deposited in your HTB in previous tax years.

Importantly, start the LISA ASAP, so you can "start the clock ticking" on the 1 year minimum for bonus payout.

Metalligator

Am I not allowed to pay the full amount into HTB this year, (£2400) £4k into LISA, then transfer HTB next tax year?
My interest is paid in macrch so tight transfer window

MrMoneyman

Can I just confirm something about the LISA.

If I open now with whatever the minimum amount is say £1 - £100, I can actually wait until next March and put in the £3900 - £3999 and then get the £1000 bonus in May 2018. Then I could pay another £4000 in April 2018 as soon as the new tax year opens and benefit from another £1000 the following month, so say May again or June 2018?

So by June 2018 I could have £10k total?

peter_333

Metalligator wrote: »

Am I not allowed to pay the full amount into HTB this year, (£2400) £4k into LISA, then transfer HTB next tax year?
My interest is paid in macrch so tight transfer window

To be honest, I don't have an answer to that. I know you're only allowed the bonus from either the HTB or the LISA, so I'd always assumed you'd need to transfer the full HTB into the LISA before 5 April to get the max bonus for the year. Happy to be corrected on this point. :-)

With regards to when interest is paid, the bank should add any interest due when the account is closed as part of a transfer. The only exception would be if the account is operating like a Regular Saver / Monthly Saver account, where you only get interest if the account is open for a full 12-months (but you should verify this with Santander).