Moving £4k into LISA at start or end of tax year?

bp5678

Hi,

I have a Marcus account, Moneybox LISA and Nationwide Help To Buy ISA.

I max out the HTB each month (£200) and max out the LISA each tax year (£4k). The Marcus account is where most of my savings are and I move £4k across into my LISA from my Marcus account each tax year. I also use the HTB account as a savings account. When I eventually do come to buy I'll move the money I've accured from my HTB into my LISA but in the meantime I don't touch my HTB and just let £200 go in each month.

Currently I have:
Marcus account = £19k (and each month I save £1k so another £1k is added to my total amount saved)
Moneybox LISA = £9k (will be £10k shortly when they give me my £1k bonus)
Nationwide HTB ISA = £5.6k

In terms of maximising my money, do I gain more money from moving £4k into my LISA at the very start of the new tax year (ie in April this year) or do I gain more money from interest/bonuses etc from moving the £4k in at the very end of the tax year just before it closes? If I do the latter, then the £4k will be sitting in with the rest of my money in my Marcus account and gaining interest during most of the year.

eskbanker

It's a close call - if you get the £4K into the LISA at the start, you'd be earning 1.25% on £5K, but only on £4K for the first couple of months before the bonus arrives, which will be approximately comparable with earning slightly higher interest on £4K in your Marcus throughout the year (depending on your exact rate, which may still be in its bonus period, initially at least).

Worth bearing in mind too that transfers from HTB to LISA do count towards the £4K annual LISA limit so you'll need to plan that across multiple tax years....

bp5678

eskbanker said:

It's a close call - if you get the £4K into the LISA at the start, you'd be earning 1.25% on £5K, but only on £4K for the first couple of months before the bonus arrives, which will be approximately comparable with earning slightly higher interest on £4K in your Marcus throughout the year (depending on your exact rate, which may still be in its bonus period, initially at least).

Worth bearing in mind too that transfers from HTB to LISA do count towards the £4K annual LISA limit so you'll need to plan that across multiple tax years....

Ok thanks. That last paragraph/sentence you wrote is really interesting. There is the possibility that i might be my first house during the next tax year so it will probably be best for me to move my Help To Buy ISA money into my LISA. 

That's led me on to another question.... if I bought a house in the next tax year, I'll move £4k from my HTB into my LISA. I'll still have money left over in my HTB so can I still move this over into my LISA? Obviously this money won't contribute to my LISA bonus since I'd already have £4k in there.

eskbanker

bp5678 said:

That's led me on to another question.... if I bought a house in the next tax year, I'll move £4k from my HTB into my LISA. I'll still have money left over in my HTB so can I still move this over into my LISA? Obviously this money won't contribute to my LISA bonus since I'd already have £4k in there.

No, you can't put more than £4K into a LISA during a tax year, it's as simple as that.  However, in your hypothetical (but impossible) scenario of paying money in without it attracting a bonus, why would you want to do that anyway?

bp5678

eskbanker said:

bp5678 said:

That's led me on to another question.... if I bought a house in the next tax year, I'll move £4k from my HTB into my LISA. I'll still have money left over in my HTB so can I still move this over into my LISA? Obviously this money won't contribute to my LISA bonus since I'd already have £4k in there.

No, you can't put more than £4K into a LISA during a tax year, it's as simple as that.  However, in your hypothetical (but impossible) scenario of paying money in without it attracting a bonus, why would you want to do that anyway?

Ok thanks. 
So say I want to buy a house, I move £4k from my HTB into my LISA. I then use the LISA money towards the house deposit.
My remainining money in my HTB I want to use towards the house deposit which is why I said I'd like to send it to my LISA. I presume I can't send it to my current account because there are penalties so what do I do with the remaining money in my Help To Buy?

eskbanker

bp5678 said:

My remainining money in my HTB I want to use towards the house deposit which is why I said I'd like to send it to my LISA. I presume I can't send it to my current account because there are penalties so what do I do with the remaining money in my Help To Buy?

No, there are no withdrawal penalties associated with HTB ISAs (you must be confusing with LISA terms), so once you've maxed your LISA you can simply withdraw anything left in your HTB to your current account at no cost....

bp5678

eskbanker said:

bp5678 said:

My remainining money in my HTB I want to use towards the house deposit which is why I said I'd like to send it to my LISA. I presume I can't send it to my current account because there are penalties so what do I do with the remaining money in my Help To Buy?

No, there are no withdrawal penalties associated with HTB ISAs (you must be confusing with LISA terms), so once you've maxed your LISA you can simply withdraw anything left in your HTB to your current account at no cost....

Ok perfect. Thanks for clearing that up!
So in an answer to my original question, do you think I'd gain slightly more interest moving money into my LISA straight away at the start of the tax year? The interest rate on Marcus accounts has dropped and if things carry on the way they are going they could aways drop again.

eskbanker

bp5678 said:

So in an answer to my original question, do you think I'd gain slightly more interest moving money into my LISA straight away at the start of the tax year? The interest rate on Marcus accounts has dropped and if things carry on the way they are going they could aways drop again.

The Moneybox rate is also variable (and has also dropped recently) so either or both can change during the year, meaning that the only realistic way to compare is to use the existing rates, allowing for any known changes such as expiry of 12-month Marcus bonus period.

Paying into the LISA at the start would earn £50 on the initial £4K plus about £10 on the bonus, and you'd only beat that by delaying if your Marcus was paying more than 1.5%, which it isn't, so crack on with paying into the LISA early on - you'd benefit very slightly (pennies) by paying in at the very start of May rather than April....

bp5678

eskbanker said:

bp5678 said:

So in an answer to my original question, do you think I'd gain slightly more interest moving money into my LISA straight away at the start of the tax year? The interest rate on Marcus accounts has dropped and if things carry on the way they are going they could aways drop again.

The Moneybox rate is also variable (and has also dropped recently) so either or both can change during the year, meaning that the only realistic way to compare is to use the existing rates, allowing for any known changes such as expiry of 12-month Marcus bonus period.

Paying into the LISA at the start would earn £50 on the initial £4K plus about £10 on the bonus, and you'd only beat that by delaying if your Marcus was paying more than 1.5%, which it isn't, so crack on with paying into the LISA early on - you'd benefit very slightly (pennies) by paying in at the very start of May rather than April....

Hey sorry I'm just revisiting this question now that the Moneybox LISA has recently reduced their interest rate?

eskbanker

bp5678 said:

eskbanker said:

bp5678 said:

So in an answer to my original question, do you think I'd gain slightly more interest moving money into my LISA straight away at the start of the tax year? The interest rate on Marcus accounts has dropped and if things carry on the way they are going they could aways drop again.

The Moneybox rate is also variable (and has also dropped recently) so either or both can change during the year, meaning that the only realistic way to compare is to use the existing rates, allowing for any known changes such as expiry of 12-month Marcus bonus period.

Paying into the LISA at the start would earn £50 on the initial £4K plus about £10 on the bonus, and you'd only beat that by delaying if your Marcus was paying more than 1.5%, which it isn't, so crack on with paying into the LISA early on - you'd benefit very slightly (pennies) by paying in at the very start of May rather than April....

Hey sorry I'm just revisiting this question now that the Moneybox LISA has recently reduced their interest rate?

The above posts were already referring to the post-reduction Moneybox LISA rate of 1.25% and I'm not aware of any subsequent changes (yet)?

bp5678

eskbanker said:

bp5678 said:

eskbanker said:

bp5678 said:

So in an answer to my original question, do you think I'd gain slightly more interest moving money into my LISA straight away at the start of the tax year? The interest rate on Marcus accounts has dropped and if things carry on the way they are going they could aways drop again.

The Moneybox rate is also variable (and has also dropped recently) so either or both can change during the year, meaning that the only realistic way to compare is to use the existing rates, allowing for any known changes such as expiry of 12-month Marcus bonus period.

Paying into the LISA at the start would earn £50 on the initial £4K plus about £10 on the bonus, and you'd only beat that by delaying if your Marcus was paying more than 1.5%, which it isn't, so crack on with paying into the LISA early on - you'd benefit very slightly (pennies) by paying in at the very start of May rather than April....

Hey sorry I'm just revisiting this question now that the Moneybox LISA has recently reduced their interest rate?

The above posts were already referring to the post-reduction Moneybox LISA rate of 1.25% and I'm not aware of any subsequent changes (yet)?

Oh sorry I didn't even realise until today that the Moneybox LISA interest has dropped. Thanks for your help.