HTB --> LISA transfer in new tax year

konstantinovs

Apologies if this has been asked already. I understand that HTB transfers into a LISA from now on will take up annual LISA allowance, is that correct? I currently have around 6k in a HTB.

1) if I wanted to transfer my HTB to a LISA I would only be able to transfer a maximum 4k of it, leaving 2k of it in HTB, and I would not be able to make any further contributions to LISA for the tax year. Is this correct?

2) if the above is true, why even bother going through the admin of filling out transfer forms and waiting. Wouldn't it be simpler for me to simply withdraw the cash from my HTB and make a brand new deposit into my LISA?

Thank you in advance!

eskbanker

Yes, your understanding is correct.

You can indeed go via cash instead of a direct ISA transfer, with a couple of minor potential disadvantages: you'd be using up an extra £4K of your annual £20K ISA allowance and your money wouldn't be earning interest for a short period while you shift it.

konstantinovs

eskbanker wrote: »

Yes, your understanding is correct.

You can indeed go via cash instead of a direct ISA transfer, with a couple of minor potential disadvantages: you'd be using up an extra £4K of your annual £20K ISA allowance and your money wouldn't be earning interest for a short period while you shift it.

Can you clarify that last point for me please? If I do an ISA transfer from HTB to LISA, it uses up the 4k LISA allowance for the year but does not take up anything of the overall 20k annual allowance? Whilst doing a withdrawal and separate contribution takes up 4k of both allowances.

eskbanker

konstantinovs wrote: »

Can you clarify that last point for me please? If I do an ISA transfer from HTB to LISA, it uses up the 4k LISA allowance for the year but does not take up anything of the overall 20k annual allowance? Whilst doing a withdrawal and separate contribution takes up 4k of both allowances.

Yes, you've summarised the situation, which is covered in more detail in the table at 9B.22 of the scheme rules, assuming the money being transferred isn't current year money (which would already have counted to current year allowance anyway).

konstantinovs

eskbanker wrote: »

Yes, you've summarised the situation, which is covered in more detail in the table at 9B.22 of the scheme rules, assuming the money being transferred isn't current year money (which would already have counted to current year allowance anyway).

Thank you!