LIFETIME ISA for self build of first home

Aubrey900

Hi there, my partner and I are in the process of building our first home. We have each been saving in a lifetime ISA account for 6 years - and now in the process of wanting to withdraw our savings in order to support completion of the build alongside our self build mortgage. 

HMRC does not stipulate any direct guidance in relation to lifetime ISA’s and self builds - Skipton our bank are suggesting we do not meet the criteria and therefore will face the government penalty (which mean we lose the bonus we have incurred aswell as a % of our own savings). We are in a desperate situation - and grateful of any advice that can be shared in relation to HMRC’s guidance for self builds/lifetime ISA’s. 

masonic

The rule of thumb is not to listen to front line bank staff about matters relating to ISAs in general. A LISA can potentially be used towards a self-build. Your conveyancer should be more knowledgeable (it might be a criterion for choosing them that they understand the use of LISAs for this purpose).

Here's a nice example of Skipton apparently being clued up about LISAs being useable for self-build and HMRC getting in a right pickle.

The conveyancer guidance may be helpful. It mentions self-builds in a few places.

eskbanker

The LISA guidance doesn't look promising, but may not be completely definitive?

If the purchase does not include a ‘legal interest in land’, such as a houseboat, or when the investor intends to build a residential property on land they already own, then they must pay a withdrawal charge.

https://www.gov.uk/guidance/lifetime-isa-withdrawals-for-a-first-time-residential-purchase#withdrawals-for-a-first-time-residential-purchase

masonic

eskbanker said:

The LISA guidance doesn't look promising, but may not be completely definitive?

If the purchase does not include a ‘legal interest in land’, such as a houseboat, or when the investor intends to build a residential property on land they already own, then they must pay a withdrawal charge.

https://www.gov.uk/guidance/lifetime-isa-withdrawals-for-a-first-time-residential-purchase#withdrawals-for-a-first-time-residential-purchase

Yes, my understanding is that the self-build property transaction needs to include the purchase of the land. The legislation covering this is found in a schedule at the end of the The Individual Savings Account (Amendment No. 2) Regulations 2017. Regulation 31 within the act, with (9)(b) covering self-builds. This is the schedule in the original 1998 regulations with all subsequent amendments. It hasn't been changed since 2017.

eskbanker

Aubrey900 said:

Hi there, my partner and I are in the process of building our first home. We have each been saving in a lifetime ISA account for 6 years - and now in the process of wanting to withdraw our savings in order to support completion of the build alongside our self build mortgage. 

OP, can you clarify exactly how far you are through the process?

Aubrey900

eskbanker said:

Aubrey900 said:

Hi there, my partner and I are in the process of building our first home. We have each been saving in a lifetime ISA account for 6 years - and now in the process of wanting to withdraw our savings in order to support completion of the build alongside our self build mortgage. 

OP, can you clarify exactly how far you are through the process?

We are at about 80% of the build process - looking to have it all finalised by the end of the year. We already own the land - and have obtained a self build mortgage to support us through the build process - our savings in our Skipton LISA were used as proof to obtain the mortgage - and we now require access to those funds to complete the remainder of our build. 

masonic

Aubrey900 said:

eskbanker said:

Aubrey900 said:

Hi there, my partner and I are in the process of building our first home. We have each been saving in a lifetime ISA account for 6 years - and now in the process of wanting to withdraw our savings in order to support completion of the build alongside our self build mortgage. 

OP, can you clarify exactly how far you are through the process?

We are at about 80% of the build process - looking to have it all finalised by the end of the year. We already own the land - and have obtained a self build mortgage to support us through the build process - our savings in our Skipton LISA were used as proof to obtain the mortgage - and we now require access to those funds to complete the remainder of our build. 

So the land was not purchased as a part-completed dwelling, such as a plot on a development?

Aubrey900

masonic said:

Aubrey900 said:

eskbanker said:

Aubrey900 said:

Hi there, my partner and I are in the process of building our first home. We have each been saving in a lifetime ISA account for 6 years - and now in the process of wanting to withdraw our savings in order to support completion of the build alongside our self build mortgage. 

OP, can you clarify exactly how far you are through the process?

We are at about 80% of the build process - looking to have it all finalised by the end of the year. We already own the land - and have obtained a self build mortgage to support us through the build process - our savings in our Skipton LISA were used as proof to obtain the mortgage - and we now require access to those funds to complete the remainder of our build. 

So the land was not purchased as a part-completed dwelling?

We purchased the land from someone who already had planning permission and had started minor works, but not a part completed dwelling no. 

masonic

Aubrey900 said:

masonic said:

Aubrey900 said:

eskbanker said:

Aubrey900 said:

Hi there, my partner and I are in the process of building our first home. We have each been saving in a lifetime ISA account for 6 years - and now in the process of wanting to withdraw our savings in order to support completion of the build alongside our self build mortgage. 

OP, can you clarify exactly how far you are through the process?

We are at about 80% of the build process - looking to have it all finalised by the end of the year. We already own the land - and have obtained a self build mortgage to support us through the build process - our savings in our Skipton LISA were used as proof to obtain the mortgage - and we now require access to those funds to complete the remainder of our build. 

So the land was not purchased as a part-completed dwelling?

We purchased the land from someone who already had planning permission and had started minor works, but not a part completed dwelling no. 

So your LISA withdrawal will not be put towards the acquisition of residential property, defined in the legislation as:

I think you are out of luck regarding making a penalty-free withdrawal if the land purchase and construction work are separate, and you only want to withdraw to fund the latter.

Aubrey900

masonic said:

Aubrey900 said:

masonic said:

Aubrey900 said:

eskbanker said:

Aubrey900 said:

Hi there, my partner and I are in the process of building our first home. We have each been saving in a lifetime ISA account for 6 years - and now in the process of wanting to withdraw our savings in order to support completion of the build alongside our self build mortgage. 

OP, can you clarify exactly how far you are through the process?

We are at about 80% of the build process - looking to have it all finalised by the end of the year. We already own the land - and have obtained a self build mortgage to support us through the build process - our savings in our Skipton LISA were used as proof to obtain the mortgage - and we now require access to those funds to complete the remainder of our build. 

So the land was not purchased as a part-completed dwelling?

We purchased the land from someone who already had planning permission and had started minor works, but not a part completed dwelling no. 

So your LISA withdrawal will not be put towards the acquisition of residential property, defined in the legislation as:

I think you are out of luck regarding making a penalty-free withdrawal if the land purchase and construction work are separate, and you only want to withdraw to fund the latter.

Ok thank you. It is just acutely frustrating - as we were unable to obtain a mortgage that allow us to purchase the land and the build costs in one. I am therefore unclear how this helps individuals such as ourselves going through this process for their first home.
Are you suggesting that had we purchased the land using the funding from our LISA accounts, that we would have been able to withdraw penalty free? 

masonic

Aubrey900 said:
Are you suggesting that had we purchased the land using the funding from our LISA accounts, that we would have been able to withdraw penalty free? 

Yes, potentially even the minimal work done at the time you purchased may have allowed this if you could have secured the mortgage, although you'd be working against the clock to complete on the timescales set out for penalty free withdrawals (~180 days). Typically I think people going down this route exchange contracts, but don't complete on the land purchase until some way into the development.