Help to Buy ISA and Savings Help!

helptobuyisahelp

I have Help To Buy ISA that is effectively almost ‘full’. It will have £12k in just before April 2025. I am aware it is not full and can be kept open, money can be added and interest will be received but I have hit the limit of my government bonus. Additionally, this account only receives less than 2% interest so it seems a little pointless adding more money in to this account. 

I have looked into getting other ISAs and saving accounts and I am unsure what to do. I know I can have other ISAs open up to 20k per year. I have looked into moving all the money into a LISA however this would take a few years before I could start adding more money. 

My real question is, if I was to open another cash ISA would I be able to use these funds at the same time as those from my Help To Buy ISA if I was to buy a property.

I have also noticed when looking into this that there are not many savings accounts that are not ISAs if I cannot use another cash ISA alongside my Help To Buy ISA. 

To put it in perspective, I am almost 27 years old. I currently live with my parents and have no real plans to move house immediately. I am wanting to move out but it is not financially viable at the moment. However, I do not want to be stuck in a year or so’s time wanting to move out alone or with someone else and not be able to do this.

masonic

You can use money from different sources in addition to the balance of your HTB ISA if you wish. You are also now free to open another cash ISA and save into it in the same tax year as your HTB ISA as the rules around this were relaxed. There are lots of non-ISA savings accounts you could consider, but at the moment the best easy access rates happen to be for ISA accounts.

If there is a possibility of you buying a first home within the next few years, then sticking with the HTB ISA would seem the most sensible option. Although remember that the scheme does end in about 5 years time. You'd need about 2 years (3 tax years) to shift your full HTB ISA balance into a LISA, then an additional year to benefit from the move by adding additional funds.

Alexland

Have you considered if the HTB ISA is still suitable for the value of property you may end up buying? The £250k price limit outside London may be very restrictive in some areas. With a LISA you can use it towards a property worth up to £450k even outside London.

Rich2808

Alexland said:

Have you considered if the HTB ISA is still suitable for the value of property you may end up buying? The £250k price limit outside London may be very restrictive in some areas. With a LISA you can use it towards a property worth up to £450k even outside London.

Very important.

Depends where the OP lives - £250k for a first home in the north east is fine but of little use in Surrey. 

It would make more sense to move it to a LISA - certainly before the HTB isa scheme is closed in 2029-30. It can no longer be utilised to get a bonus for house purchases after November 2030. The LISA scheme is available indefinitely - and has a higher limit outside London - so if no immediate plans to buy that makes more sense.

And of course you need to remain a first time buyer (in practice first time owner) - if you inherit a share of a home in a will you are no longer eligible for an FTB bonus once probate is through or the stamp duty incentive.

Alexland

Rich2808 said:
It would make more sense to move it to a LISA - certainly before the HTB isa scheme is closed in 2029-30. It can no longer be utilised to get a bonus for house purchases after November 2030. The LISA scheme is available indefinitely - and has a higher limit outside London - so if no immediate plans to buy that makes more sense.

Given we are in the final 3 months of the tax year now then they could make 3 tax years of LISA contribution and have the 3 bonuses added into the account over the next 18 months. Giving up on the HTB ISA would mean the money would be earning a better interest rate, that deadline goes away, the outside London limit would be higher and any contributions in subsequent tax years would gain bonuses in excess of what the HTB ISA could have claimed.

However there's always the LISA early withdrawal penalty to consider.

PRAISETHESUN

For the most part, the cash for a house purchase can come from any combinations of savings accounts - both ISA and non-ISA - so there won't be any issues with having some money in your H2B ISA and more money elsewhere. You can (and should) shop around for the best rates.

I closed my H2B ISA last year as ultimately I decided £250k was going to potentially limit any house choices, and the interest rates were pathetic. H2B ISAs are treated as a standard cash ISA, so transferring it to another provider is fairly straightforward. The obvious choice is a LISA, but the withdrawal restrictions are pretty steep. You need to be 100% committed to using the money to purchase a house otherwise it's expensive to access unless you leave it alone until retirement.

You need to have a LISA open for at least 1 year before you can use it for a house purchase though, so if it's something you think you might consider then at the very least open it now and deposit £1, and you can decide down the line if you want to add more.

Alexland

PRAISETHESUN said:

The obvious choice is a LISA, but the withdrawal restrictions are pretty steep.

I don't know if I would go to describe an overall 6.25% loss pretty steep. It's bad but hardly life changing and there is always the workaround of only withdrawing most of the money such that the penalty on the partial withdrawal equals the total bonus received on the whole contribution. I think the reason it might feel steep (and I nearly paid it myself at one point in the divorce negotiations) is that once the bonus money has been lingering in your LISA account for a while you feel a sense of ownership and there's a natural reluctance to give it back again.

helptobuyisahelp

masonic said:

You can use money from different sources in addition to the balance of your HTB ISA if you wish. You are also now free to open another cash ISA and save into it in the same tax year as your HTB ISA as the rules around this were relaxed. There are lots of non-ISA savings accounts you could consider, but at the moment the best easy access rates happen to be for ISA accounts.

If there is a possibility of you buying a first home within the next few years, then sticking with the HTB ISA would seem the most sensible option. Although remember that the scheme does end in about 5 years time. You'd need about 2 years (3 tax years) to shift your full HTB ISA balance into a LISA, then an additional year to benefit from the move by adding additional funds.

Thanks for your help. One thing I am struggling to find an answer on is how does using the government bonuses work if you are using several ISAs? 

Alexland

helptobuyisahelp said:

Thanks for your help. One thing I am struggling to find an answer on is how does using the government bonuses work if you are using several ISAs? 

Your solicitor cannot both claim a HTB ISA bonus and do a penalty free withdrawal from a LISA for the same person. Your solicitor would do one or the other as you direct them. If you had other ISAs you would simply withdraw the money and bank transfer it to your solicitor's client money account.