Martin Lewis: Should I move my Help to Buy ISA into a Lifetime ISA?

MSE_Eesha

This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.

Martin Lewis: Should I move my Help to Buy ISA into a Lifetime ISA?

Please click 'post reply' to discuss below.

Cherimd

My daughter has a LISA , she has maxed out this years contribution , she is buying a house ant the end of April , can she put any funds in in the new financial year and if so how much ?

bfos

Anyone any thoughts whether the 250k limit for the h2b isa will go up - when my daughter started saving we didn’t think house prices would go up as much - but now they are going around 240-270 in the area where she lives. If she goes over the 250 k we presume she can’t use it - she has been saving for years and has around 9k in it, but wants to buy in the next 12-18 months, so Lisa won’t let her save much in it 

gemmasherratt83

Confused is an understatement.
Currently have 8k savings in a 0.01% interest account.... boooooo. We are wanting to buy our first property in the next 1-2 years, but this solely depends on the financial situation. Husband is 41, im 37, im really confused as to where is the best for me to put this money. Please help.

Wings_of_Ambition

gemmasherratt83 said:

Currently have 8k savings in a 0.01% interest account.... boooooo. We are wanting to buy our first property in the next 1-2 years, but this solely depends on the financial situation. Husband is 41, im 37, im really confused as to where is the best for me to put this money. Please help.

Couldn't comment on the best place to put it, but if it's at least 1 year until you buy, then putting £4k in a LISA now will give you a £1000 bonus for this tax year (though you'll need to move quickly with this), and putting the remaining £4k in during the new tax year (in, say, 2 weeks time) will give you another £1000 bonus.  Some caveats - the house price would need to be under £450,000 and a first-time purchase, and if you don't use the LISA for a house purchase and end up withdrawing it, you will lose more than you put in, as MSE's article on LISAs explains.

Wings_of_Ambition

Cherimd said:

My daughter has a LISA , she has maxed out this years contribution , she is buying a house ant the end of April , can she put any funds in in the new financial year and if so how much ?

Yes, she can put a further £4k in once the new tax year starts.  Important to note that she can only use the LISA if it's been open more than 1 year.  There's little point adding further funds if it's been open for less than a year by the end of April.

Wings_of_Ambition

bfos said:

Anyone any thoughts whether the 250k limit for the h2b isa will go up - when my daughter started saving we didn’t think house prices would go up as much - but now they are going around 240-270 in the area where she lives. If she goes over the 250 k we presume she can’t use it - she has been saving for years and has around 9k in it, but wants to buy in the next 12-18 months, so Lisa won’t let her save much in it 

I can't see them raising the threshold, tbh.

One thing to consider - the max bonus you can get on a HTB ISA is £3000 on a balance of £12000.  Your daughter could get £12k into a LISA within 13 months.  £4k this week, £4k in the new tax year, and £4k at the start of the 22/23 tax year.  That would allow a house purchase up to £450k and also tick the box of having had it open for over 1 year.  Admin timings may preclude transferring £4k from the HTB ISA into a LISA before this tax year ends, but if you're sure you want to use a LISA instead of the HTB ISA, you could withdraw £4k and pay it into a Cash LISA straight away.  Alternatively, if you have £4k spare in, say, a savings account.... use that for this tax year, and you've then got time to decide what to do with the HTB ISA balance.

paulc67

My daughter was unable to use her HTB ISA when purchasing her property last year as the purchase price exceeded the limit. Does it make sense to transfer the funds into a LISA and is there any tax benefit retention from so doing on the transferred amount (less than £5k)?

Wings_of_Ambition

paulc67 said:

My daughter was unable to use her HTB ISA when purchasing her property last year as the purchase price exceeded the limit. Does it make sense to transfer the funds into a LISA and is there any tax benefit retention from so doing on the transferred amount (less than £5k)?

I'm assuming from your post that your daughters house purchase went ahead and was completed?  If so, the only benefit of transferring into a LISA would be if she intends to keep the LISA until age 60.  Withdrawing the cash before that would incur penalties greater than the amount put in.

Alternatives might be a Cash ISA with a better rate of interest, or perhaps a Stocks & Shares ISA if investing is something she would consider.

Withdrawing the cash from the HTB ISA would mean you're taking it out of the tax wrapper, but with a fairly generous annual ISA allowance of £20,000, I would say that losing the tax wrapper on the £5k is only really an issue if she intends to put more than £20k into an ISA this coming tax year.

JoeGuerin2

Is the 25% annual bonus for the LISA split across the 12 months each year? Or is it 25% of whatever value you have in at the end of the Tax Year?

Wings_of_Ambition

JoeGuerin2 said:

Is the 25% annual bonus for the LISA split across the 12 months each year? Or is it 25% of whatever value you have in at the end of the Tax Year?

A number of providers pay in the bonus shortly after you add any money.

So pay in £1000 in May, and you'll possibly receive your bonus on that payment (£250) in June, pay in £2000 in August, receive £500 in September, etc.

Best to check with your inidividual provider as to when they pay.