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Lifetime ISAs guide

edited 14 May 2018 at 1:33PM in ISAs & Tax-free Savings
2.4K replies 370.5K views
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  • PlusPlus Forumite
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    An interesting side-question: how does the LISA relate to the Flexible ISA provisions?

    Obviously flexibility depends on the provider offering it, which presumably many won't. But I wonder if there's any scope for withdrawing and then paying back money into the LISA. For instance, you want some cash as a bridging loan when buying a house. Withdraw cash (paying 5% fee), do transaction, pay cash back into LISA before the end of the tax year. Is the LISA in scope to do that?

    The 5% fee is a hefty disincentive, of course, but it could be a useful pot to raid for temporary cash if it were possible.
  • Hi there,

    I have a quick question about first-time buyer status and LISA's. If I open one without having owned a property, but inherit a portion of one before I manage to buy one, will I lose the bonus for purchasing? i.e. Would I need to wait until I'm 60 to receive. Thanks for your help.
  • colstencolsten Forumite
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    The first time buyer bonus will only be available to people who have never owned an interest in a property (same criteria as fot the HTB ISA).

    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508176/Lifetime_ISA_final.pdf
  • colsten wrote: »
    The first time buyer bonus will only be available to people who have never owned an interest in a property (same criteria as fot the HTB ISA).

    Thanks. This makes me quite nervous about investing money in the ISA owing to the 5% charge. I wouldn't mind losing the government bonus if circumstances change, but it could take my wife and I 10-15 years to save for a house and if either of our parents died we'd get a small interest in a home, but not enough to justify waiting until 60 to return the savings.
  • edited 28 March 2016 at 5:19PM
    grey_gym_sockgrey_gym_sock Forumite
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    edited 28 March 2016 at 5:19PM
    Phil1482 wrote: »
    Thanks. This makes me quite nervous about investing money in the ISA owing to the 5% charge. I wouldn't mind losing the government bonus if circumstances change, but it could take my wife and I 10-15 years to save for a house and if either of our parents died we'd get a small interest in a home, but not enough to justify waiting until 60 to return the savings.

    this is a legitimate point, but you should consider whether this is a risk worth taking. there are a few ways of looking at it ...

    how does the (estimated) size of the potential inheritance (not just the share in a property, but total amount inherited, if there if more beside a property) compare to what you might lose with the 5% penalty? (and to what you might gain, if you get the 25% bonus?)

    and how likely are you to take the 5% hit, based on how long you'd expect it to take before you're ready to buy a property, compared to life expectancies of parents (based on their ages)?

    that gives you potential gain vs potential loss, with approximate probabilities.

    or, to look at it another way: would the inheritance be enough to enable you to buy a property immediately, after paying the 5% penalty? if it would, then you could say that using LISA maximizes your chances of buying a property sooner.

    you could also start with HTB ISA, rather than LISA, and consider whether to transfer it to a LISA at the last possible point (viz. 5 april 2018).
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  • I have a question...
    I set up a Help To Buy ISA in December and am buying a house in July. After seeing you can get the 'double-whammy' bonus by transferring funds into a Lifetime ISA is it worth me not using my Help To Buy on my house purchase and instead transfer it across in April '17?

    I know there was eligibility checks that were made in order for me to open the HTB account but now that it's open can I not use it and still get the bonus for transferring it across even though I will in fact own a house when applying for the bonus? Obviously it makes quite a lot of difference (£2,800 if I've done my maths correct) but I don't want to risk losing the HTB bonus in order to get the double bonus as you've suggested. I have a feeling they will do 'another' eligibility check when I claim the bonus so I wouldn't be able to take advantage of it.
  • LinguaLingua Forumite
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    this is a legitimate point, but you should consider whether this is a risk worth taking. there are a few ways of looking at it ...

    how does the (estimated) size of the potential inheritance (not just the share in a property, but total amount inherited, if there if more beside a property) compare to what you might lose with the 5% penalty? (and to what you might gain, if you get the 25% bonus?)

    and how likely are you to take the 5% hit, based on how long you'd expect it to take before you're ready to buy a property, compared to life expectancies of parents (based on their ages)?

    that gives you potential gain vs potential loss, with approximate probabilities.

    or, to look at it another way: would the inheritance be enough to enable you to buy a property immediately, after paying the 5% penalty? if it would, then you could say that using LISA maximizes your chances of buying a property sooner.

    you could also start with HTB ISA, rather than LISA, and consider whether to transfer it to a LISA at the last possible point (viz. 5 april 2018).

    I am in a similar position where I may inherit a share of a property between opening the ISA and buying my first house.

    I wonder if it would be possible to pass on ownership of the inherited property to the other family member, purchase my own home, then purchase the share of the property from the family member. Of course, that risks a change in property price in the meanwhile, but that's unlikely to be a large amount in this area. The family member is also trustworthy, so that isn't an issue.

    Still, a lot to consider. After all, the government would be rather unfair to punish a person for inheriting property if it is unexpected (unexpected death or inheriting from family member you did not know about).
    Long-Term Goal: £23'000 / £40'000 mortgage downpayment (2020)
  • colstencolsten Forumite
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    Lingua wrote: »
    After all, the government would be rather unfair to punish a person for inheriting property if it is unexpected (unexpected death or inheriting from family member you did not know about).
    Excuse me? If you had an inheritance, or inheritance windfall - however sad the circumstances of the inheritance might have been -, you'd expect the taxpayer to give you something extra on top?
  • Hello All.

    I opened a help to buy with Halifax in December and have been putting the maximum in each year.

    Am I best served transferring this into a LISA once it becomes available. Are there any downsides to the LISA over HISA? Will LISA also include a gross interest like banks have offered?

    As I see it the HISA allows me to pay in £2,400 per year and the LISA will allow £4,000 per year so I can get an extra £250 per year in bonuses. This was less noticeable in the first year of comparison as I made use of the extra £1000 pay in during opening the account but looks less impressive once the numbers go into year 2.

    Many thanks.
  • N1AKN1AK Forumite
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    Now I cant get access to either of the H2B or LISA for that purpose. I'm sure I'm not the only one in this situation - plenty of people come out of divorce badly and end up in rented...why not give these people a chance?

    Unfortunately they decided to put a cut off in place to avoid the risk that people would use buying additional property to get a government handout or quick access to the cash. Obviously this leads to some groups, like yourself, being excluded but is that any more unfair than the fact that someone earning £100k and renting could benefit from this, but someone earning £20k and living in a tiny box flat they've scrimped to get a mortgage on can't?
    Having a signature removed for mentioning the removal of a previous signature. Blackwhite bellyfeel double plus good...
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