What advice re' Help To Buy ISA with £13K invested.

TennisFan

Hello,
I'd appreciate a sense check on the advice I'm thinking of giving my daughter re' her H2B ISA .

She is hoping to buy a house in the second half of 2026 (although nothing is certain!!),  but given the current housing market its’ likely to cost more than the £250k H2B ISA limit.

So it seems that her H2B ISA is actually pretty useless! 

Transferring all the funds to a LISA would take at 2 - 3 years (£4K every Tax year) and then is effectively locked in unless used for a house purchase, as there is a 25% penalty for withdrawing funds before age 60. Whilst saving for retirement is a good idea, inflation is going to reduce the real value of the LISA by that age.

So, I’m thinking to give her maximum flexibility I would advise : 

- Open a LISA now (as it has to be open 12 months before a bonus is paid) but only put in a £1, then when she knows she will definitely be buying a house, move £4k from her H2B ISA into the LISA - this will at least get her a £1K government bonus.

- In due course move the money left in the H2B ISA into an ordinary  cash ISA - she'll have to sacrifice the government bonus but she retains control and flexibility over her remaining funds.

Thoughts? 

thank you

Ch1ll1Phlakes

Hi. This sounds fine. The £1 advice is a Martin Lewis tip and one I imagine many people have now done. If you haven't done so already get an estimated price of a house she might look at buying as it may fall under the £250k limit without you realising. Though based on the depth of your message I imagine you may already have done so.

As you have noted, contributions to Lifetime ISAs are per tax-year. So if your daughter was to buy a house in late 2026, she could have moved £8k from her help to buy ISA into the Lifetime ISA (i.e. 4k in the 25/26 Tax-year and a further 4k in the 26/27 tax-year - though you did mention flexibility so you've maybe already considered this).

TennisFan said:

- Open a LISA now (as it has to be open 12 months before a bonus is paid) but only put in a £1, then when she knows she will definitely be buying a house, move £4k from her H2B ISA into the LISA - this will at least get her a £1K government bonus.

Slightly wrong here, the account has to be opened 12 months before you can use it to buy a house - the bonuses are paid roughly a month after your deposits even before the account is open 12 months.

Furthermore Lifetime ISA changes may be in the pipeline but may not come into effect before your daughter buys a house. I wouldn't worry to much about these though.

TennisFan

Thank you Ch1ll1Phlakes - that's a helpful answer.

Ch1ll1Phlakes

TennisFan said:

Thank you Ch1ll1Phlakes - that's a helpful answer.

No problem @TennisFan. Just wanted to add one more thing. With 13k in the help to buy isa, I'd be immediately moving any excess over 12k (preferrable by transfer if her isa allows it) to an account with a better interest rate as soon as possible as the interest rates in H2B ISAs are rubbish.