How do I maximise the Help to Buy ISA and Lifetime ISA?

opica

Ive been paying into the Help to Buy ISA and have £3,400 up to now and still going.

When should I start the Lifetime ISA assuming I want to buy a house after a year or two from now?

(I know you need at least a year before bonus can be used)

How do I maximise the Help to Buy before transferring it into the Lifetime ISA?

It's confusing after reading so many articles on what to do including the Moneysavingexpert advice.

Is the best scenario to make last payment into the Help to Buy in April (before the 6th), stop payments, open and deposit £4,000 into Lifetime and then transfer Help to buy into Lifetime?

TIA.

Chaykin

Not sure if I got it right but this is the way I see it for the 2017/18 tax year:

bobobski

I'm in the same position as you so I get how confusing it is. From the answers the others on here have helpfully provided, my plan (which may not be the same as yours - see below) is:
- Keep paying into HtB ISA indefinitely
- Open LISA in April with at least £1
- If LISA interest is no worse than current interest on my £4k (well, £3,999), move it immediately; if not, move it towards the end of the tax year
- If LISA interest is no worse than current interest on my HtB, move my balance as at 5 April 2017 into LISA immediately; if HtB interest is significantly better (as I suspect it will be), move this balance towards the end of the tax year
- 2017/2018 year contributions in HtB ISA to remain there purely for the interest rate, which is currently one of the highest of my accounts - a sad time to be saving indeed

So, by the end of the 2017/2018 tax year I will have a LISA with £4k plus whatever is in my HtB ISA immediately before it, and I will have a HtB ISA with £2,400 in it. The £2,400 will stay there until I withdraw it, not to be moved into LISA (unless I can't find another £4k in a subsequent tax year, then I'll deposit it).

Now, my circumstances are that I'm saving much more than I think most first time buyers save. As such, I know that I will not be buying any time soon, so I have time to play around with this structure. If you think you'll be buying within the next year or so (your timing from your original post is unclear), it makes sense for you to open the LISA with £1 (just in case) but keep the money in the HtB ISA, as you won't be able to use the deposit in the LISA until a year after you opened it.

As for how to maximise the HtB before transferring it into the LISA, at this point all you can do is contribute £200 in March and the first few days of April.

Hope that helps.

bobobski

Chaykin wrote: »

Not sure if I got it right but this is the way I see it for the 2017/18 tax year:

An interesting diagram, but something it doesn't take account of and that I realise I also forgot to mention is tax. It just changes the calculation of what a "better" interest rate in a current account means. I know this won't affect many people, but I for one will be paying tax on my savings interest this year - woe is me, I know...

Chaykin

Thanks bobobski. This was just a quick sketch and yes, it assumes few things incl. you don't pay tax on interest, (i.e. you don't exceed your Personal Saving Allowance) you plan to buy a home on or after 06/04/2018 and probably some other things I cannot think of at the moment. I also forgot to add what to do if any of the interest rates are equal but then just follow the YES or NO arrow to your preference.

opica

Thanks Chaykin and Bobobski. I plan on getting a house in over a years time (no rush). I think I get the gist. Is the scenario in my OP a correct way but 'inefficient'? (ie, since Lifetime ISA interest rate is lower than Help to Buy) and that your chart is essentially to max gains on interest?

Also, why does it state march to do the transferring etc in the article ('First-time buyers’ trick: Max LISA and Help to Buy ISA gains by timing it right' on here) as opposed to 5th April stated above (I think your correct). Sorry it wont let me post link.

Is it worth starting the Lifetime ISA because Ive also read many Lifetime ISA scaremongering articles.

bobobski

The scenario in your OP isn't wrong, but assuming you can still save up to £200 per month aside from the LISA, stopping payments into your HtB ISA raises the question of where those savings are going. Don't get me wrong, there are plenty of good places for that money (e.g. a number of 5% regular savers), but leaving the HtB ISA open and continuing to contribute to it notwithstanding its transfer into the LISA gives you flexibility in your savings. We don't know LISA interest rates yet but given the general fall in interest rates, except HtB ISAs on the whole, they are highly likely to have lower interest rates.

March instead of 5 April to allow some slack. There's not a huge loss if you make the transfer a couple of weeks early, but if you forget/your bank is slow dealing with your application etc, then you've lost the window to transfer an additional amount into the LISA.

How much do you expect to spend on your first house? That will largely answer the question of whether it's worth starting a LISA. For me personally, I literally only opened a HtB ISA so that I could transfer it into a LISA

binaryuniverse

Certainly thread I'm interested in. I was going to ask similar, but it made sense to wait and see what products became available, first.

If they offer under 3%, then it makes sense for me to open a LISA with £1, then build up as much as I can in my Tesco accounts. Then put £4000 in to the LISA just before the end of the tax year.

This does only work for year one though, doesn't it? Year two you have to go monthly.

opica

I think you mean £3,999 to take it to £4,000?

I think its lump sums you can put in so up to £4,000 each year? But bonus is paid full first year and monthly thereafter?

opica

Im not sure how much, just that I want to buy a house in a year or two after Ive saved up some. Id guess £150,000.

opica

I was thinking of opening a Lifetime ISA on 6th April and putting £1,600 in and continuing the Help to Buy monthly pay in.
Then on 5th April 2018 (or before to be safe it goes through) transferring Help to Buy ISA into Lifetime ISA.

Would this not conflict with not being allowed to pay into 2 ISA's in a tax year?

Does this not suggest that if you put £1 or £1,600 (doesn't matter) into Lifetime ISA at any time between 6th April 2017 - 6th April 2018, then you can't continue to paying into Help to Buy as this would conflict?