Can you open a second (& contribute to) L-ISA in a tax year? 17 December 2022 at 5:57PM in ISAs & tax-free savings 7 replies 184 views

B0bbyEwing

So you open a (cash) LISA in the current tax year, pay in to it, use the whole lot for a house purchase, get the keys, job done, cash LISA is now £0.

Can you then open a S&S LISA the next day & contribute in to that?

Or do you have to wait until the next tax year?

masonic

Assuming you paid £4k into the cash LISA before using for the house purchase, then no, as you'd be exceeding the annual LISA allowance. If you contributed less than £4k, then you'd need to either top up the existing cash LISA and transfer it to the S&S LISA, or transfer the empty LISA in order to avoid subscribing to two ISAs of the same type in one tax year.

B0bbyEwing

masonic said:

Assuming you paid £4k into the cash LISA before using for the house purchase, then no, as you'd be exceeding the annual LISA allowance. If you contributed less than £4k, then you'd need to either top up the existing cash LISA and transfer it to the S&S LISA, or transfer the empty LISA in order to avoid subscribing to two ISAs of the same type in one tax year.

Ahh got you. 

April it is then. Thanks.

eskbanker

B0bbyEwing said:

So you open a (cash) LISA in the current tax year, pay in to it, use the whole lot for a house purchase...

If you do this then you're likely to be hit with a 25% penalty on withdrawal, so it's probably not a particularly realistic scenario, but, as above, there will probably be a way to accommodate a reasonable proposition, although it'll almost always be best to plan ahead (by more than a year) when opening a LISA....

B0bbyEwing

eskbanker said:

B0bbyEwing said:

So you open a (cash) LISA in the current tax year, pay in to it, use the whole lot for a house purchase...

If you do this then you're likely to be hit with a 25% penalty on withdrawal, so it's probably not a particularly realistic scenario, but, as above, there will probably be a way to accommodate a reasonable proposition, although it'll almost always be best to plan ahead (by more than a year) when opening a LISA....

I can confirm that this was done and no hitting of any penalty took place.

alibean121

B0bbyEwing said:

eskbanker said:

B0bbyEwing said:

So you open a (cash) LISA in the current tax year, pay in to it, use the whole lot for a house purchase...

If you do this then you're likely to be hit with a 25% penalty on withdrawal, so it's probably not a particularly realistic scenario, but, as above, there will probably be a way to accommodate a reasonable proposition, although it'll almost always be best to plan ahead (by more than a year) when opening a LISA....

I can confirm that this was done and no hitting of any penalty took place.

Well you must have previously held a LISA prior to the start of the current tax year. If you haven't had a LISA for a full calendar year then there will be a penalty on withdrawal whatever you're using it for.

I don't know many people opening multiple LISAs mainly as conveyancing fees for processing multiple accounts are going to dwarf any interest gain.

B0bbyEwing

alibean121 said:

B0bbyEwing said:

eskbanker said:

B0bbyEwing said:

So you open a (cash) LISA in the current tax year, pay in to it, use the whole lot for a house purchase...

If you do this then you're likely to be hit with a 25% penalty on withdrawal, so it's probably not a particularly realistic scenario, but, as above, there will probably be a way to accommodate a reasonable proposition, although it'll almost always be best to plan ahead (by more than a year) when opening a LISA....

I can confirm that this was done and no hitting of any penalty took place.

Well you must have previously held a LISA prior to the start of the current tax year. If you haven't had a LISA for a full calendar year then there will be a penalty on withdrawal whatever you're using it for.

I don't know many people opening multiple LISAs mainly as conveyancing fees for processing multiple accounts are going to dwarf any interest gain.

Yes. It was already running with Beehive & then once the current tax year came around, 4k was put in it.

Fully aware about the full calendar year requirement which is why I didn't ask about it.

Anyway, it's sorted, masonic covered everything & I gave them thanks.

eskbanker

B0bbyEwing said:

alibean121 said:

B0bbyEwing said:

eskbanker said:

B0bbyEwing said:

So you open a (cash) LISA in the current tax year, pay in to it, use the whole lot for a house purchase...

If you do this then you're likely to be hit with a 25% penalty on withdrawal, so it's probably not a particularly realistic scenario, but, as above, there will probably be a way to accommodate a reasonable proposition, although it'll almost always be best to plan ahead (by more than a year) when opening a LISA....

I can confirm that this was done and no hitting of any penalty took place.

Well you must have previously held a LISA prior to the start of the current tax year. If you haven't had a LISA for a full calendar year then there will be a penalty on withdrawal whatever you're using it for.

I don't know many people opening multiple LISAs mainly as conveyancing fees for processing multiple accounts are going to dwarf any interest gain.

Yes. It was already running with Beehive & then once the current tax year came around, 4k was put in it.

Fully aware about the full calendar year requirement which is why I didn't ask about it.

Anyway, it's sorted, masonic covered everything & I gave them thanks.

For the avoidance of doubt, as can be seen in the quotes, my comment was in the context of the original version of the story, i.e. opening a LISA (as opposed to funding one that had been opened in an earlier year) and withdrawing in the same tax year....