Help To Buy ISA queries?

phillyt2k

I have a Help To Buy ISA with 25K in it. I've just been paying in the £200 per month for years and not really given it much thought.

Now the interest rate has dropped to 1.05% for anything over 12K.

1. Is there any point putting more than 12K in a Help To Buy ISA? As the maximum bonus is 25% capped at 3K.
2. Would it be better to take 13K out and transfer it to another ISA with a better interest rate? And also stop paying money into the Help To Buy altogether?
3. Would it be better moving the whole thing to a LISA, or is this a bad idea as it can only be moved in 4K instalments, so would take years to get back up to (and past) the 3K bonus.

 

Mark_d

What is an RTB ISA?

phillyt2k

Sorry it was meant to be "right to buy". Although now I'm beginning to question where I ever got that phrase from. I think I've been Mandela effected....

So "help to buy" I should have said.

Jami74

If you are planning to use the money for a deposit on a home you could transfer £4k to a LISA and find somewhere with better interest for the other £9k (whether it needs to be an ISA depends on your tax position).

phillyt2k

Thanks for your help. I have more queries and it might get more complicated now though.

Ok, so I have a the help to buy ISA currently which I've only paid £400 in since April this year (has around 25K in it now)

I have another ISA I've opened with Lloyds this tax year which I've paid £17,600 in to. So a total of 18K has been paid into ISA's this tax year.

So from my HTB ISA's 25K I could transfer 4K into a brand new LISA (leaving 21K)

I could transfer 9K from my HTB ISA to the Lloyds ISA (leaving me with the 12K to get the maximum bonus)

Would I still be able to add 2K (if I could save it) into my Lloyds ISA as I've only paid 18K into an ISA this tax year?

WillPS

Certainly there is no point saving beyond £12k in an HTB ISA at low interest. Request a transfer for the excess to a better rate ISA (don't withdraw it or attempt to transfer it yourself!) and it won't affect this year's allowance.

Are you definitely going to buy a first house and if so will it definitely be no earlier than May 2027?

If the answer to either is no, it makes sense to leave £12k in a HTB ISA - but you should at least transfer to one offering a better rate: https://www.moneysavingexpert.com/savings/help-to-buy-isa/#bestbuys

If yes to both, get a LISA open with £1 today (to start the 1 year clock). Transfer £4k from your HTB ISA by April 5th 2026, then transfer another £4k by April 5th 2027, then finally transfer the final £4k after April 6th 2027. This will leave you with a balance of £15k locked in a LISA. If you're still waiting to buy come April 6th 2028, you can then add another £4k and the same for every other subsequent tax year (presuming the LISA scheme remains open).

As a bonus, there is more competition in the LISA market than H2B ISA market, so your money will be earning more interest. 

PRAISETHESUN

1) Correct - there's no benefit to having over £12k balance since that is the cap on the bonus that will be paid out

2) Always use the specific ISA transfer process, never withdraw the balance yourself. Do a partial ISA transfer to move the excess above £12k to another cash ISA provider paying better interest.

3) LISA would be the better choice if you're definitely committed to purchasing a property, as there are withdrawal penalties otherwise. You can't use both H2B and LISA, so you need to pick one. It'll take a few years to transfer it all over as you're limited to £4k chunks, so depending on your purchase timeframe it may or may not make sense for you.