Moving from Help to Buy ISA to Lifetime ISA for house deposit

aw95

Hi all.

This is my first post on the MSE forums and I have a query about moving from a HTB to Lifetime ISA in order to get the govt bonus for a house deposit. Me and my partner are first time buyers and we have both been saving into HTB ISAs for a house deposit. I opened mine in late 2016 and I am now nearing to the amount needed for the max bonus, with my partner just over half way. 

With increasing house prices, I sense that the £250k purchase limit on the HTB ISA might be an issue in the future as we would likely be buying outside London and just over the limit. We have actually both opened Lifetime ISAs with £1 in each about a year ago just incase (to get the clock ticking), however I doubt we will buy for at least another two years now. I did consider transferring to the Lifetime ISA when they were introduced, however was put off by the withdrawal penalty (although we are highly likely to buy now so not as much of an issue) and that the accounts at the time were mainly limited to stocks and shares. 

My question is do we have to transfer the money from our HTBs to Lifetime ISAs, or can we transfer from a normal savings account as the HTB has a decent interest rate so would be good to keep them going? I understand that we can only put in a max of £4000 each tax year, so I guess the deadline for the first instalment is 5th April? I also want to ask if anyone else is in this situation - the bonus would be really useful and it would give use some more options if we can look at properties over £250k.  

Thanks for your help in advance and I hope this all makes sense!

masonic

You can keep the HTB ISAs for the interest and fund the LISAs using other savings. You are correct that you'll each need to pay in £4000 on or before 5th April or you will lose any part of the annual allowance you did not use. Since interest rates are generally low for cash LISAs, it doesn't make much sense to pay in too far in advance of the end of the tax year if you can earn better rates of interest elsewhere.

Alexland

If you are with Moneybox they seem to have their own weird tax year that ends before 5th April. Either way best to make the contribution a few weeks in advance incase there are any unexpected issues.

aw95

masonic said:

You can keep the HTB ISAs for the interest and fund the LISAs using other savings. You are correct that you'll each need to pay in £4000 on or before 5th April or you will lose any part of the annual allowance you did not use. Since interest rates are generally low for cash LISAs, it doesn't make much sense to pay in too far in advance of the end of the tax year if you can earn better rates of interest elsewhere.

Alexland said:

If you are with Moneybox they seem to have their own weird tax year that ends before 5th April. Either way best to make the contribution a few weeks in advance incase there are any unexpected issues.

Thank you both for your responses and advice, they are very helpful. Our Lifetime ISAs are with Moneybox so thanks for the heads up! We'll probably have a think about it further over the next month and will make sure to pay in a few weeks ahead of the tax year deadline.

aw95

Thanks again to the two contributors who responding to my earlier question, really appreciate it. We have put the full amount into our LISAs for this tax year and will do so again the next.

As mentioned, I have decided to keep my HTB ISA going alongside as it gives a better rate of interest and will continue to contribute to it. I'm currently researching into stock & shares ISAs as I want to invest for the long term and planning to drip feed it with a smaller proportion of my income, so not to be used for short term savings. I'm aware of that it can go up/down and I'm still weighing up the pros/cons.

My question is, is there anything which prevents me from holding separate HTB, LISA (Cash type) and S&S ISAs at the same time, as long as I keep to the £20k per year limit of course? I know you can hold a HTB and separate Cash ISA at the same time, so thats the reason for my question!

Thanks!

aw95

Sorry I should clarify that I was meant to say 'I know you can't hold a HTB and Cash ISA at the same time'!

masonic

You can hold a HTB ISA and another cash ISA at the same time, but you cannot pay into both within the same tax year. You can hold and pay into a HTB ISA, a LISA, and a S&S ISA within the same tax year as they are all different types of ISA.

eskbanker

Strictly speaking you can pay into a HTB ISA and a cash ISA in the same tax year, if they're both with one of the small number of providers offering split ISAs....

aw95

Thanks again for your responses and clarification, really appreciate it and food for thought