Can I transfer funds to a LISA?

afmfifgh

Hi,

I have searched and can't find the answer to my question so hoped someone on here might be able to help.

I meet the qualifying criteria for opening a LISA. Though have not opened one to date.

However, I have already paid in my £20,000 ISA allowance for 2018/19 into an Instant Access ISA which contains funds from previous years, more than £4,000.

I believe it is not possible to transfer PART of this current years ISA allowance, it has to be transferred as a whole amount, so I wouldn't be able to move £4,000 of the already paid in 2018/19 allowance to a new LISA, if I have understood correctly.

However, is it possible to transfer £4,000 to a LISA from my previous year's subscriptions.

Any help on this would be really appreciated as I am a bit confused and the person at the bank wasn't sure either who I spoke with.

Thanks.

eskbanker

afmfifgh wrote: »

However, is it possible to transfer £4,000 to a LISA from my previous year's subscriptions.

Yes, provided your chosen LISA provider accepts inbound transfers from non-Lifetime ISAs.

Skipton does, as per https://www.skipton.co.uk/savings/isas/lifetime-isa/faqs:

Can I transfer funds from another ISA into a Skipton Online Cash Lifetime ISA?

Cash ISA, Stocks and Shares ISA or Innovative Finance ISA

Transferring funds from a previous year’s ISA counts towards your £4,000 Lifetime ISA allowance but not your £20,000 annual ISA allowance.

afmfifgh

Thank you for your reply. Perhaps I didn't explain myself very well when I spoke to Skipton and confused the person as they didn't seem sure. It was probably more me confusing them than them not knowing.

Just to clarify, can I:

a) Transfer £4,000 of the £20,000 2018/19 allowance that has already been paid into the Instant Access cash ISA

b) Have to transfer £4,000 from previous years subscriptions that is in the same Instant Access Cash ISA

or

c) Either of the above.

Reason I ask is from memory when transferring funds between ISA's you have to state which of a) or b) you want to do.

Thanks again.

badger09

afmfifgh wrote: »

Thank you for your reply. Perhaps I didn't explain myself very well when I spoke to Skipton and confused the person as they didn't seem sure. It was probably more me confusing them than them not knowing.

Just to clarify, can I:

a) Transfer £4,000 of the £20,000 2018/19 allowance that has already been paid into the Instant Access cash ISA

b) Have to transfer £4,000 from previous years subscriptions that is in the same Instant Access Cash ISA

or

c) Either of the above.

Reason I ask is from memory when transferring funds between ISA's you have to state which of a) or b) you want to do.

Thanks again.

b)
more characters

bowlhead99

From HMRC perspective, I think the answer is (c) 'either of the above', even though as a practical matter you're subject to what the providers will support.

a) you can transfer £4k of current year Cash ISA money into a LISA and that £4k will be treated as having been paid into the LISA and never into the Cash ISA, so you will not break the £20k limit and you will get your bonus because it's new money coming into a LISA that hasn't already been in a LISA and got a bonus before.

b) you can transfer £4k of previous year Cash ISA money into a LISA and that £4k will count as 'new LISA money' which qualifies for a bonus because it has never received a bonus in another LISA before, but it won't count as 'current year ISA subscriptions' because it's previous year ISA subscriptions.

However, even if HMRC allow either method, both providers have to support it.

Option (b) seems easiest because ISA providers will typically be happy for you to break off chunks of previous year ISA money of whatever size you like and transfer it out to another ISA, as long as the receiving manager is happy to receive it.

Option (a) is potentially more problematic because cash ISA providers generally don't like to transfer out a partial split of current year money - as the rules tell them that current year ISA subscriptions of one type must all stay together. In theory, they should be able to do it, because when the £4k out of the current-year £20k leaves the other £16k behind, the £4k and £16k will be in different types of ISAs, and the £4k in the LISA will be treated as having never been in the cash ISA. So it should be fine ; but provider process issues or staff training issues may get in the way.

badger09

bowlhead99 wrote: »

From HMRC perspective, I think the answer is (c) 'either of the above', even though as a practical matter you're subject to what the providers will support.

a) you can transfer £4k of current year Cash ISA money into a LISA and that £4k will be treated as having been paid into the LISA and never into the Cash ISA, so you will not break the £20k limit and you will get your bonus because it's new money coming into a LISA that hasn't already been in a LISA and got a bonus before.

b) you can transfer £4k of previous year Cash ISA money into a LISA and that £4k will count as 'new LISA money' which qualifies for a bonus because it has never received a bonus in another LISA before, but it won't count as 'current year ISA subscriptions' because it's previous year ISA subscriptions.

However, even if HMRC allow either method, both providers have to support it.

Option (b) seems easiest because ISA providers will typically be happy for you to break off chunks of previous year ISA money of whatever size you like and transfer it out to another ISA, as long as the receiving manager is happy to receive it.

Option (a) is potentially more problematic because cash ISA providers generally don't like to transfer out a partial split of current year money - as the rules tell them that current year ISA subscriptions of one type must all stay together. In theory, they should be able to do it, because when the £4k out of the current-year £20k leaves the other £16k behind, the £4k and £16k will be in different types of ISAs, and the £4k in the LISA will be treated as having never been in the cash ISA. So it should be fine ; but provider process issues or staff training issues may get in the way.

Are you sure?

I don't profess to be an expert on LISA, but can't see any ref to exemption from the 'all current year subscriptions must be kept together' rule. Happy to be corrected.