help to buy Isa and Lisa advice and clarification

irondeb

Both my adult children each have a Help to buy Isa and a Lisa. Both single and are not in a position to buy for a while.
They are both contributing small amounts to their help to buy isa - we've never thought to change this.
A couple of years ago they both opened a LISA, ( on Martin's advice)  which is not being contributed to.
Question: should they cancel payments into the Help to buy and put into a Lisa instead? And just leave the Help to buy isa money where it is? Are you supposed to just contribute to the same lisa over multiple years? Is the idea that you just pay into this and then transfer it around for a better rate? or is it OK to open a new Lisa each year?  I'm obviously aware of the £20k annual limit. To be honest, I've never really understood this system - many thanks in advance!

eskbanker

Much will depend on how much they've accumulated and when they're likely to be purchasing, but a first time property purchase needs to be supported with one or the other, not both, so they need to make a decision about which to fund.

The HTB ISA scheme only has a few more years to run, so won't help them if they're buying in more than five years time.

LISA is generally a better scheme, with a more generous property value cap outside London, but does have withdrawal penalties if using the money for anything else.  Up to £4K per tax year can be paid into a LISA, whether that's new money or transferred from other ISAs such as HTB.

irondeb

to follow on from that, are they supposed to keep the 1 lisa and just pay into that each year, or can they open a new one each  year? 

Alexland

irondeb said:

to follow on from that, are they supposed to keep the 1 lisa and just pay into that each year, or can they open a new one each  year? 

An individual can only contribute to one LISA each tax year although they are allowed to move it to a new provider and continue to contribute with the remaining allowance up to the annual limit.

If they are still under 40 then they can also open a new 'parallel' LISA with a different provider the next tax year and contribute then again move it around etc.

In practice most people would only want one LISA and move it around to get the best Cash rate or S&S investment choice/cost as there's no obvious reason someone would want to run multiple LISA accounts ongoing.