Worth transferring in Help to Buy ISA to LISA?

aj23_2

I opened a Help to Buy ISA in April 2016, and have maxed it out since. The balance is £5,678 (£78 interest in March 2017).

I opened a Lifetime ISA with Skipton Building Society last week, and I am drip feeding £4,000 into it over the next four weeks (to avoid current account shock).

In the 2018/19 tax year, I will add another £4,000 to the Lifetime ISA, and obviously again in 2019/20 tax year.

Is it worth me transferring my Help to Buy ISA into the Lifetime ISA (I have two days if yes) as I would get a 25% bonus on £9,678 in this tax year? I'm currently getting 4% on my Help to Buy ISA, and will get an interest payment on Friday (should be about £200).

If I do this, 60-70% of my money will be in restricted access accounts. That is why I am hesitant. But it is ultimately for towards a house deposit, and what I am generally saving for within 5 years.

Eco_Miser

Probably, but note that anything paid into the HTB since 5 April 2017 counts as part of the £4000 you can put in the LISA this year.

Alexland

You have the option to transfer the HTB ISA balance at 5th April 2017 into the LISA for a bigger 25% bonus when using the LISA for a qualifying purchase. It's really your choice but the LISA withdrawal penalty isn't much bigger than the bonus if you really needed the money....

aj23_2

So my balance on my HTB ISA on 5 April 2017 was £3,278. it is now £5,678

What made me think it was this article: http://www.telegraph.co.uk/investing/isas/new-lifetime-isaeverything-need-know/

It says that, hypothetically, if you already have £4,020in your HTB, you can transfer that into the LISA, add another £4,000 to the LISA as part of this years contribution, and get 25% on £8,020.

Is this article wrong then? As it's implying that you can add £8,200 in this tax year.

eskbanker

aj23 wrote: »

So my balance on my HTB ISA on 5 April 2017 was £3,278. it is now £5,678

What made me think it was this article: http://www.telegraph.co.uk/investing/isas/new-lifetime-isaeverything-need-know/

It says that, hypothetically, if you already have £4,020in your HTB, you can transfer that into the LISA, add another £4,000 to the LISA as part of this years contribution, and get 25% on £8,020.

Is this article wrong then? As it's implying that you can add £8,200 in this tax year.

It's clearly misleading if that sentence is taken in isolation, but it should be seen in the context of the slightly earlier comment that "You can transfer funds saved into your Help to Buy Isa into a Lifetime Isa before April 5 2017 without it affecting your annual allowance.", i.e. it's assuming the £4,200 is all pre-2017/18 money. The figure is presumably derived from opening a HTB at launch and maxing it up to April 2017....

aj23_2

eskbanker wrote: »

It's clearly misleading if that sentence is taken in isolation, but it should be seen in the context of the slightly earlier comment that "You can transfer funds saved into your Help to Buy Isa into a Lifetime Isa before April 5 2017 without it affecting your annual allowance.", i.e. it's assuming the £4,200 is all pre-2017/18 money. The figure is presumably derived from opening a HTB at launch and maxing it up to April 2017....

I asked Santander what the maximum balance is for a Help to Buy ISA is, and they said once it reaches £12,000, I can't deposit anymore to it. So i would reach that in 2-3 years if I carry on as normal, and you can deposit until 2030 (closed to new applicants from November 2019)

So, based on £3,278 before 5 April 2017, is still worth me transferring that to the Lifetime ISA?

bowlhead99

aj23 wrote: »

I asked Santander what the maximum balance is for a Help to Buy ISA is, and they said once it reaches £12,000, I can't deposit anymore to it. So i would reach that in 2-3 years if I carry on as normal, and you can deposit until 2030 (closed to new applicants from November 2019)

So, based on £3,278 before 5 April 2017, is still worth me transferring that to the Lifetime ISA?

IMHO, yes. The Lifetime ISA will allow you to contribute a further £4k a year going forward, in addition to a bit more this year than you have currently saved into the HTB, while the HTB ISA is stuck at £2400 a year and will hit a cap (and there's also a cap on value of property you can buy with it, outside London, which might affect some people depending on their circumstances).

If you are likely to eventually raise a total deposit of over £12k it would definitely be worth instead using a product where a bonus of over £3k is available based on you having more to put away than that.

aj23_2

bowlhead99 wrote: »

IMHO, yes. The Lifetime ISA will allow you to contribute a further £4k a year going forward, in addition to a bit more this year than you have currently saved into the HTB, while the HTB ISA is stuck at £2400 a year and will hit a cap (and there's also a cap on value of property you can buy with it, outside London, which might affect some people depending on their circumstances).

If you are likely to eventually raise a total deposit of over £12k it would definitely be worth instead using a product where a bonus of over £3k is available based on you having more to put away than that.

Thanks for your reply.

So my balance as at 5 April 2017 was £3,478.04.

I have put in £2,200 in this current tax year.

It is now £5,678.04 (interest payment this Friday).

So I can transfer £2,200, top it up to this years £4,000 contribution limit, and the remaining £3,478.04 (plus interest owing) is allowed to be transferred in too as a one off, so in April I will get a 25% bonus from HM Treasury on about £9,900. So it is effectively creating a hidden year as a one off in terms of contributions, if that makes sense?

bowlhead99

The amount that you can transfer in as a one-off is the amount in the account at 5/4/2017 plus any interest that was accrued in your HTB but unpaid at that point. The amount you can put in as a normal 2017/18 allowance is £4000 whether than comes directly from a bank account or a mixture of money from your bank account and money that went into your HTB during 2017/18 and then got transferred to the LISA.

So, you can transfer everything you currently have in the HTB by transferring it all (and closing it as part of the process) and that process will move all your 'previous year money' into the new LISA as well as any money that's got there through current year contributions.

Then the difference between the 2017/18 LISA limit (£4000) and [the amount that wasn't in the HTB at 5/4/17 and wasn't accrued interest in the HTB at 5/4/17] can be put in as a separate contribution to top your 'current year' LISA contributions.

I'm not sure how you get to £9900. Sounds like you had about £3.5k at the start of this tax year (i.e. pre 2017/18 money) plus a bit of interest that had been accrued but not applied to your account by the start of this tax year. And you are allowed to add another £4k of 2017/18 money (including anything that went via your HTB in the current year) , so you'll have about £3.5k+£4k: which is £7.5k give or take a bit of accrued interest on your opening balance coming into this tax year. They will look at all that money in your LISA at the end of the year, and grant you the bonus on that £7.5k.

You seem to be adding £3.5k+£4k+£2.2k+ a bit of interest, and making £9900 on which you want a bonus. That sounds ambitious to me.

aj23_2

I thought it mean that I could add my HTB ISA in full, as well as add another £4,000 for this years contributions, hence the £9,900 figure. I didn't realise what I had add to this years HTB allowance came out of the LISA allowance.

aj23_2

If I only want to transfer my pre 5 April 2017 contribution (so that my HTB stays open and retains my post 6 April 2017 contributions in it), do I have to transfer all of it or can I choose how much?