Confused about HTB to LISA Transfer

NeeWii

My apologies if this has already been discussed, I couldn't find anything specific on this in the forum.

I've just opened a LISA with Skipton, and have money in a previous Help-to-Buy (HTB) account that I'd like to transfer into the LISA (without impacting my 17/18 LISA allowance). I've been continuing to put money in the HTB on a monthly basis this year, and had intended to keep funds in the HTB until March 2018 (given the higher interest rate on the HTB account) before transferring the balance over to the LISA.

The Skipton employee that set up the account for me assured me that:

- I did not need to transfer any funds into the account to open it, and to start the initial "1-year" countdown before usage on a mortgage.
- He also mentioned that if I was to put £1 into the LISA, I would no longer be able to do a transfer of the HTB funds into the LISA, without impacting my 17/18 allowance.

However, I just received an email from Skipton that explained that the account would not be fully opened until I transferred money into the account (which I had to do within 30 days of set-up), which goes against what the employee told me.

My question is - if I put £1 into the LISA to properly open it and start the 1-year countdown, will I be able to later transfer my HTB balance (as it was at April 2017) into the LISA without infringing on my 2017/18 allowance? Or do I need to do the transfer now, on initial account-opening, in order to ensure my 2017/18 allowance isn't impacted?

Thanks in advance!

eskbanker

As usual, the written word is more reliable than what in-branch (or call centre) staff say on most subjects!

So, yes, it's true that any ISA is only officially open once money has been paid in, either new money or by transfer, so you do need to fund it to get the clock ticking.

£1 will do, and simply has the effect of reducing your 2017/18 allowance to £3,999, and doesn't impact on your ability to transfer prior year HTB money outside of the current year £4K allowance, so you can continue with your plan to transfer this before the end of the tax year.

NeeWii

Thanks eskbanker, very much appreciated.

I went down to the branch to ask the employee today about this (prior to your response) and he added that it wasn't possible to pay into a HTB and LISA in the same tax year - so as putting £1 into the account constitutes a payment into the LISA while I've still been paying into my HTB since April this year, it wouldn't be allowed. All that can be done is to transfer the HTB balance in full to the LISA. Seems really quite counter-intuitive, and I'm really not convinced he's right about this.

Ideally my plan is to continue to pay the monthly £200 into the HTB until March 2018 (so contributing £2,200 over the 11 months in this tax year), and at that point close/transfer the HTB in full to the LISA account - including current year contributions and the balance as it was at April 2017 - and separately top-up the remaining allowance for the current year LISA contributions from that £2,200 paid in, up to the remaining £3,999 of annual allowance. Is there anything wrong with this plan that you can see?

I don't suppose you can point me to a recommended and reliable source detailing the rules around this, so I have it in writing and can use it to support any dispute around this I may end up having?

Thanks again,

NeeWii

eskbanker

NeeWii wrote: »

I went down to the branch to ask the employee today about this (prior to your response) and he added that it wasn't possible to pay into a HTB and LISA in the same tax year - so as putting £1 into the account constitutes a payment into the LISA while I've still been paying into my HTB since April this year, it wouldn't be allowed. All that can be done is to transfer the HTB balance in full to the LISA. Seems really quite counter-intuitive, and I'm really not convinced he's right about this.

He's wrong again - the ISA rules dictate that you can only pay new money into one ISA of each type per tax year, but HTB is a subset of cash ISAs, and Lifetime ISAs are a different type, so you can pay into Cash/HTB and Lifetime (and S&S and IF) ISAs in the same year if you wish.

NeeWii wrote: »

Ideally my plan is to continue to pay the monthly £200 into the HTB until March 2018 (so contributing £2,200 over the 11 months in this tax year), and at that point close/transfer the HTB in full to the LISA account - including current year contributions and the balance as it was at April 2017 - and separately top-up the remaining allowance for the current year LISA contributions from that £2,200 paid in, up to the remaining £3,999 of annual allowance. Is there anything wrong with this plan that you can see?

No, it's fine.

NeeWii wrote: »

I don't suppose you can point me to a recommended and reliable source detailing the rules around this, so I have it in writing and can use it to support any dispute around this I may end up having?

The main MSE article is http://www.moneysavingexpert.com/savings/lifetime-ISAs and covers the HTB transfer issue more specifically at http://www.moneysavingexpert.com/savings/lifetime-ISAs#property6

The high-level government LISA document is https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508176/Lifetime_ISA_final.pdf, where paragraph 1.16 covers what you want to do this year.

If you really need something to do, you can wade through the 361 pages of the full official ISA rules at https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/603261/ISA_Lifetime_ISA.pdf, where para 1.12 summarises the different ISA types as mentioned above. Section 9B has all the detail about LISA and HTB - happy reading!

NeeWii

Couldn't have asked for a more comprehensive response, thanks again!