"Best" way to split ISA allowance?

j_netprofit

In April I split my allowance into 16k SSISA and 4k LISA.

I've just received my LISA 1k Gov Bonus, which I thought would have automatically reinvested into my chosen fund (with Dodl) however it's just gone into the available cash. Maybe that's a foresight issue by myself seeing as if it did go into that I would have then obviously invested more than my allowance. 

So my question is what are the best amounts to split anticipating your bonus?

£3,200 plus gov bonus makes £4k, but under utilising the scheme, possibly missing out longterm.

Or have I just made an admin error and maybe requested Dodl to put my bonus into cash? 

Mark_d

My understanding is that you can contribute a max of £4k into your LISA plus a further £16k into your S&S ISA.  Government bonus, interest, dividends etc. don't affect the amount your can contribute into your annual ISA allowance.

Alexland

The bonus doesn't count as a contribution into the account so you are free to put £16k into a S&S ISA and the £4k into the LISA each tax year. If the bonus has been added as cash within the LISA account you just need to invest it.

Generally you are free to switch between investments and cash inside a S&S ISA or LISA account wrapper as much as you like although not all ISA providers support account cash balances some require the account to be fully invested in something.

j_netprofit

You're completely right...just tried again and it's worked!

Yesterday I must have been trying to add 1k to my LISA rather than use the funds already in there....doh!

Thanks for clearly explaining it though.

So in summery, the typical ISA allowance may in fact be 20k but if you maximise a LISA it's actually 21k! 

Alexland

jay_ftw said:

So in summery, the typical ISA allowance may in fact be 20k but if you maximise a LISA it's actually 21k! 

Yes with both individual contributions and government bonus(es) £21k can be added into the accounts.

That's why I have been filling up my LISA every tax year since it launched in 2017.

j_netprofit

Revisiting this tread I made last year…

If you have the full lump sum ready to invest next week are you going full 20k isa or 16k isa and 4k lisa? 

eskbanker

j_netprofit said:

Revisiting this tread I made last year…

If you have the full lump sum ready to invest next week are you going full 20k isa or 16k isa and 4k lisa? 

Depends what you're intending to use the LISA for, but if you're confident that you'll be accessing the money without being subject to withdrawal penalties, i.e. by buying a first property or waiting until 60, then it's a no-brainer to fully use the LISA allowance.

Malchester

Depends on individual circumstances and what you are wanting to achieve with the funds. I try to balance out maturity dates. Currently have 5 Yr Gatehouse Bank ISA (2029 maturity) and 2 Yr Lloyds ISA (maturity March 2026). So this coming tax year have opened in preparation a 15 month Paragon ISA and a double access ISA with Paragon with funds split between the two

j_netprofit

Malchester said:

Depends on individual circumstances and what you are wanting to achieve with the funds. I try to balance out maturity dates. Currently have 5 Yr Gatehouse Bank ISA (2029 maturity) and 2 Yr Lloyds ISA (maturity March 2026). So this coming tax year have opened in preparation a 15 month Paragon ISA and a double access ISA with Paragon with funds split between the two

Agree, it’s horses for courses.

For me it’ll be 16k into SS ISA with iWeb and 4k (to be turned into 5k) into LISA with AJBell. All invested into a global index fund.

sammy_zammy

j_netprofit said:

Revisiting this tread I made last year…

If you have the full lump sum ready to invest next week are you going full 20k isa or 16k isa and 4k lisa? 

I don’t have it ready, but if I did:

I’d work out whether I’d earn more interest on 4k in an ISA or savings vs 5k (with the 1k government bonus) in a LISA. Obviously the longer it’s in a LISA, the longer you have the government bonus, so this difference varies with time, so there’s likely an ideal time where it’s best to transfer to LISA.

I’d then put ~14k in the top easy access ISA, likely with the intention of transferring to a fixed rate if rates drop. And I’d save ~2k to use throughout the year in case any deals come up with a minimum deposit of up to 1k, such as Shawbrook.