LISA - Home purchase before bonus is paid

luath

I have had an offer accepted for a property and we aim to finish completion by mid-may. I have £15k in my LISA at present and I am about to transfer £4k into it to qualify for the £1k bonus for this tax year but I believe the timing will mean the purchase will go through before the bonus is paid.

The below FAQ from Skipton makes it sound as if my whole LISA balance of £19k will go to the purchase, LISA will be closed, I will then receive the £1k bonus and LISA would re-open, to withdraw the LISA it will be subject to 25% withdrawal charge so I will still end up with £750 bonus cash.

Is my thinking correct? I just don't want to be stupid and lose out in any way. Here is the FAO from Skipton-

Skipton Lifetime ISA Frequently Asked Questions:

HMRC will calculate bonus payments for your Lifetime ISA on a month-by-month basis. Your bonus is calculated on any payments you make into your account from the 6th of the month to the 5th of the following month. Your bonus will be paid into your account within 14 days of the 20th of month two.
For example:

1. Pay into your Lifetime ISA between 6 April and 5 May

1. The bonus is then calculated between 6 May and 20 May

1. Your bonus is paid by 3 June

What if a bonus payment arrives after the house purchase has completed?
If your account is closed, it’ll be reinstated and the bonus paid in. We’d record a break in membership with the Society on the system if you don’t have any other accounts with us. We’d then contact you to confirm we’ve received the bonus and ask you what you’d like to do with the amount received. You would have to pay the 25% government withdrawal charge if you choose to withdraw it before the age of 60.

eskbanker

Your thinking is correct (although you could leave a token amount in the LISA rather than withdrawing every penny if you didn't want the account closed and reopened) - it's a very similar situation to the one discussed in this thread:

https://forums.moneysavingexpert.com/discussion/6251230/claim-lifetime-isa-bonus-before-officially-paid-into-account

underground99

Yes, the bonus will end up in your account, but you won't be able to use it for a qualifying house purchase as your purchase has already completed, so you will have the choice of either withdrawing the £1000 with 25% penalty (to get £750 cash) or investing the £1000 until you can draw it out after the age of 60 penalty-free.

If you were investing it for age 60+ as part of retirement planning you would transfer it to an S&S LISA provider and put it in investment funds which would grow over time. If you left it in a 'cash' LISA product like Skipton's, its value in real terms would reduce a lot due to inflation.