LISA advice needed

Medwards1

Hi there,

I’m looking to set up an LISA to save for my first property. However I’m experiencing some issues and not sure what to go ahead with.

Due to my partner’s higher wage, it’s likely that we’ll be buying a property that’s more than £450k which is the limit for a LISA. Of course, I want to contribute as much as possible to the deposit as I can and a government bonus would be ideal. If we do purchase a more expensive property than this, I can see that I’ll receive the penalty charge of 25% so will effectively lose some money. Would it be better to set up a normal cash ISA to be begin saving or take the risk of setting up a LISA just in case we buy somewhere cheaper than £450k?

Alternatively, is there another government bonus scheme which includes property worth more than £450k?

Many thanks,
M

Alexland

If you are buying above £450k then the government don't feel you need help.

You have another 6 months to decide as you don't need to open the LISA(s) or make the £4k contribution(s) until towards the end of the tax year on 5th April. However a LISA does need to be open for at least 12 months before being used for a penalty free qualifying property purchase. Also you wouldn't want to leave it too late incase unexpected issues cause a problem in making the contribution.

If you did make a contribution this tax year and then didn't go on to use the LISA towards the property purchase you could always transfer it to a S&S LISA and use the account to invest for retirement to avoid the 25% penalty. This wouldn't work if you needed the money in order to buy the property so alternatively you could withdraw a proportion of the LISA account balance such that the penalty paid was less than the bonus on the entire contribution and then transfer the remaining account balance to a S&S LISA for age 60+.

Alex