Help: Rules around having both a Lifetime ISA and a Help to Buy ISA

mheneghan

Hi,
I have searched the forum for some time and can't seem to find the answers I need on the rules around keeping both accounts open. I hope someone here can help. 

First of all, I know I can only claim the bonus on one of the accounts. My situation is as follows:

I have a Help to Buy with around £3000 in. I'm hoping to begin accelerating my savings with a view to buying in 2 years. I have decided to open a LISA and plan to pay the maximum in both.

My questions is: Is there anything to stop me transferring funds from my Help to Buy into the LISA in a couple of years just as the new tax year begins (up to the maximum of £4000)?

So if I save the maximum this tax year of £4000 into the LISA and do the same the following year, I will have £8000 in the LISA and will also have £7000 in my Help to Buy. Is there anything stopping me transferring £4000 out of the Help to Buy in April 2022 to bring the balance of my LISA up to £12000 and obtain the bonus for that year. 

The reason I want to keep the Help to Buy open is the interest rate is quite generous and it offers great flexibility to withdraw cash when needed. 

I hope someone can give me a definitive answer on this. 

Thanks

Ed-1

mheneghan said:

Hi,
I have searched the forum for some time and can't seem to find the answers I need on the rules around keeping both accounts open. I hope someone here can help. 

First of all, I know I can only claim the bonus on one of the accounts. My situation is as follows:

I have a Help to Buy with around £3000 in. I'm hoping to begin accelerating my savings with a view to buying in 2 years. I have decided to open a LISA and plan to pay the maximum in both.

My questions is: Is there anything to stop me transferring funds from my Help to Buy into the LISA in a couple of years just as the new tax year begins (up to the maximum of £4000)?

So if I save the maximum this tax year of £4000 into the LISA and do the same the following year, I will have £8000 in the LISA and will also have £7000 in my Help to Buy. Is there anything stopping me transferring £4000 out of the Help to Buy in April 2022 to bring the balance of my LISA up to £12000 and obtain the bonus for that year. 

The reason I want to keep the Help to Buy open is the interest rate is quite generous and it offers great flexibility to withdraw cash when needed. 

I hope someone can give me a definitive answer on this. 

Thanks

You don't 'claim' the bonus on the Lifetime ISA. It gets paid into the account shortly after you make your contributions into it (as it can also be used like a pension to save for retirement). The rules are that you can't claim the bonus on the Help to Buy ISA and make a penalty-free withdrawal from the LISA both to make a first-time house purchase.

So yes, you can certainly do what you said.

Jemsnation

I'm in a similar situation, I have 6k in my H2B and wonder if I should just keep putting 200 per month in there or should I open a LISA? I guess it might depend on when I'm ready to buy but I'm not sure yet. 

masonic

Jemsnation said:

I'm in a similar situation, I have 6k in my H2B and wonder if I should just keep putting 200 per month in there or should I open a LISA? I guess it might depend on when I'm ready to buy but I'm not sure yet. 

If you have £6k now and could pay in another ~£2k by the end of the tax year, then it would take about 3 tax years (including this one) for you to build up a larger sum in a LISA vs continuing to pay into the HTB ISA. If you plan to buy before the 2022/23 tax year then sticking with the HTB ISA will result in more bonus money, providing you meet the terms of the scheme, which are a bit more restrictive than for a LISA. It would be worth putting £1 in a LISA now, and then deferring the decision until late March 2021, when you can either top up with £3,999 (from your HTB ISA balance or elsewhere) before the end of the tax year, or stick with the HTB ISA.

Jemsnation

masonic said:

Jemsnation said:

I'm in a similar situation, I have 6k in my H2B and wonder if I should just keep putting 200 per month in there or should I open a LISA? I guess it might depend on when I'm ready to buy but I'm not sure yet. 

If you have £6k now and could pay in another ~£2k by the end of the tax year, then it would take about 3 tax years (including this one) for you to build up a larger sum in a LISA vs continuing to pay into the HTB ISA. If you plan to buy before the 2022/23 tax year then sticking with the HTB ISA will result in more bonus money, providing you meet the terms of the scheme, which are a bit more restrictive than for a LISA. It would be worth putting £1 in a LISA now, and then deferring the decision until late March 2021, when you can either top up with £3,999 (from your HTB ISA balance or elsewhere) before the end of the tax year, or stick with the HTB ISA.

That's true. Could I keep paying into both? 400 in the LISA plus any extra a month into the H2B? My interest rate is "decent" on my H2B so would be good to keep benefitting from that. 

masonic

Jemsnation said:

masonic said:

Jemsnation said:

I'm in a similar situation, I have 6k in my H2B and wonder if I should just keep putting 200 per month in there or should I open a LISA? I guess it might depend on when I'm ready to buy but I'm not sure yet. 

If you have £6k now and could pay in another ~£2k by the end of the tax year, then it would take about 3 tax years (including this one) for you to build up a larger sum in a LISA vs continuing to pay into the HTB ISA. If you plan to buy before the 2022/23 tax year then sticking with the HTB ISA will result in more bonus money, providing you meet the terms of the scheme, which are a bit more restrictive than for a LISA. It would be worth putting £1 in a LISA now, and then deferring the decision until late March 2021, when you can either top up with £3,999 (from your HTB ISA balance or elsewhere) before the end of the tax year, or stick with the HTB ISA.

That's true. Could I keep paying into both? 400 in the LISA plus any extra a month into the H2B? My interest rate is "decent" on my H2B so would be good to keep benefitting from that. 

Yes, you can use your HTB ISA as a savings account until you buy your home, and use the bonus from the LISA instead.

tomy71

Jemsnation said:

I'm in a similar situation, I have 6k in my H2B and wonder if I should just keep putting 200 per month in there or should I open a LISA? I guess it might depend on when I'm ready to buy but I'm not sure yet. 

you can transfer your existing H2B ISA into a LISA and it will not count towards this years ISA allowance. The benefit with a LISA is that the 25% bonus is added into the pot within a couple of months not just upon purchase. You can also choose to invest a LISA to try and get growth if you have a long enough time frame before buying a house.

eskbanker

tomy71 said:

Jemsnation said:

I'm in a similar situation, I have 6k in my H2B and wonder if I should just keep putting 200 per month in there or should I open a LISA? I guess it might depend on when I'm ready to buy but I'm not sure yet. 

you can transfer your existing H2B ISA into a LISA and it will not count towards this years ISA allowance. The benefit with a LISA is that the 25% bonus is added into the pot within a couple of months not just upon purchase. You can also choose to invest a LISA to try and get growth if you have a long enough time frame before buying a house.

The earlier answers from masonic seem rather more comprehensive and accurate to me - although it's true that ISA transfers don't count towards the annual ISA allowance, they don't circumvent the annual £4K LISA limit, so it isn't possible to transfer £6K in a HTB ISA into a LISA in one go.

Likewise it's also true that LISA bonuses are added earlier than HTB ones, but I wouldn't say that's 'the benefit', or even a primary one - the higher contribution limit is an important differentiator, as is the higher property purchase value cap.

The last statement, while again strictly factual, is unlikely to be an appropriate suggestion IMHO - I'd argue that investment rather than saving won't be applicable for the vast majority of people saving for a property deposit, given timescales and risks.

If you're an IFA, you'll obviously spend time assessing your client's exact circumstances before advising, but in this forum environment it can be quite misleading to make broad statements that don't really characterise the product....