Help to buy ISA transfer to Lifetime ISA

agt1988

Hi all,


I'm trying to work out the best strategy for having both a Lifetime ISA and Help to Buy ISA.


I currently have a HTB ISA with a balance of £3460, and am looking at opening a cash LISA to take advantage of the increased limits.


I currently contribute £200/month into my HTB ISA. I plan on opening a cash LISA when one becomes available (Poss. June this year). I do not want to lose out on my monthly contributions, and as per the guide I still want the opportunity to buy prior to June 2018.


Now, I plan on contributing an additional £2,200 (11 months * £200) into the HTB ISA in the 2017/18 tax year. If I understand the rules correctly:


The current HTB balance at the end of the 2016/17 tax year does not contribute towards the LISA limit (£3,460 + £865 gov't bonus + remaining interest) and can be transferred in at any point during the 2017/18 tax year.


The additional £2,200 I will be contributing over the course of the 2017/18 tax year does contribute towards the LISA limit, meaning that I can only save an additional £1,800 before the end of the 2017/18 tax year.


I can't withdraw any of the LISA balance to buy my first home without penalty until July 2018 (>1 year after account opening). In which case, assuming I will be in a position to buy at around this time and I have the spare money to do so, it would be in my interest to deposit the full £4,000 at the start of the 2018/19 tax year ready for when the 12 month min account age point is reached, thus gaining the full year 2 £1,000 bonus.


Assuming my maths is correct and I have the funds to do this, I will have a total LISA balance at the end of the first year of account holding of:


£3,460 (HTB ISA [2016/17] transfer in)
£865 (HTB ISA [2016/17] gov't bonus)
£2,200 (2017/18 contributions from HTB ISA)
£1,800 (2017/18 contributions to LISA)
£1,000 (Year 1 gov't bonus)
£4,000 (2018/19 contributions to LISA)
£1,000 (Gov't bonus at point of closing July 2018)

---

£14,325 [£11,460 + £2,865 bonus] + interest


So, by July 2018, assuming I make full use of the allowance and I don't buy prior to this, I will have at least £14,325 for use as a deposit against my first home.


I take it that the above calculations are correct, and this is would be my best strategy to save for a house purchase in mid 2018? Are there any other catches I need to look out for?

AimHigh

Hi agt,

I'm going through a similar process right now so will be interested in the responses we see here.

One thing I do want to point out is that I *think* I've spotted a mistake in your calculations. You can only get the Government bonus on either your HTB ISA or your Lifetime ISA. As such, when you transfer your HTB ISA across to the LISA, you will not be eligible for the govt bonus (the £865) as this is only accessible when withdrawing the money from your HTB ISA for the purpose of buying a house.

I may well be wrong here but that's my understanding.

Regards,
AH

agt1988

Hi AH,


I'm not sure if I am correct, but I think there is an exception to the ISA transfer rule for HTB ISA contributions prior to 6/4/17. The following link seems to imply that HTB ISA funds deposited prior to 06/04/17 will have the 25% government bonus applied at the point of transfer. The transferred funds from the 2016/17 tax year (including the bonus) will not contribute to the ISA deposit limit, and will not have an additional 25% bonus applied. However, HTB ISA funds deposited after today will count towards the £4,000 limit, and the bonus will be applied to this money at the end of the tax year.


This rule only applies during the 2017/18 tax year. For future tax years, transfers will count towards the annual limit, and the HTB bonus will not be paid. Transfers after this point will be in effect the same as withdrawing all funds from the HTB ISA and paying them in to the LISA - it will count as a normal deposit (as such, there will be no benefit to doing an ISA transfer compared to withdrawing the funds from the HTB ISA and paying them in to the LISA). So if you want to transfer the ISA, you will need to do it well in advance of the 6th April 2018 (to take into account transfer delays, etc.).


You can still have both a LISA and HTB ISA, but you can only claim the 25% house deposit bonus on one account, so if you are saving for a house deposit and are not intending to buy until 2018, it would be worth transferring the funds across. Since you need the account open for at least a year, its best not to commit by transferring the HTB ISA until March 2018 (but do open a LISA and deposit at least the minimum as soon as they are available, so that you start the anniversary timer ASAP) - that way, you won't block yourself from using the funds prior to the anniversary. I don't know how it works for if you hold both a LISA (for a pension) and a HTB ISA (for a house deposit). I would imagine (but not completely sure) that the total deposit limit of £4,000/yr applies to the sum of deposits across both accounts.


Note that this will not apply to deposits to a HTB ISA made in the 2017/18 tax year prior to transferral. These count towards the £4,000 limit and the bonus will only be paid on these funds at the end of the 2017/18 tax year.


https:// www. helptobuy .gov.uk/help-to-buy-isa/faq/#Lifetime-ISA

During the 2017-18 tax year only, those with a Help to Buy: ISA will be able to transfer in the savings they have built up before 6 April 2017 to the Lifetime ISA, and still save an additional £4,000 into a Lifetime ISA in that year. The whole amount saved will benefit from the 25% government bonus. However, there is an initial minimum holding period of 12 months from account opening before withdrawals that can be made for a home purchase. - See more at: https /www. helptobuy .gov.uk/help-to-buy-isa/faq/#Lifetime-ISA

EDIT: Upon further investigation, you can hold both a HTB ISA and a LISA at the same time, and take advantage of the government bonus on the total £6,400 annual deposit limits across both accounts. However, you can only use one account for a house deposit, and both accounts are restricted to first time buyers (for deposits). As such, you will only be able to use the LISA funds as a pension (and the HTB ISA for a house deposit) - this may be of interest to people who want to maximise the government bonus.

AimHigh

Ah yes - I believe you are correct!

It seems like the sensible option is to open a LISA today, keep hold of your HTB ISA and then transfer it across in March 2018 (assuming the amount saved in the HTB ISA during 17/18 + whatever you've put into your LISA do not exceed £4,000 when combined). This way you've got the security of the HTB ISA if you want to buy within 12 months and can benefit from the full bonus if you buy later than 12 months without the threat of losing too much value with it being a S&S LISA.

It's highly likely that I've got that entirely wrong so if there's a gaping hole in there somewhere then by all means point it out!

Regards,
AH