Transferring HTB ISA to LISA
htis
Posts: 7 Forumite
Hi,
This may be pretty obvious but I can't get my head around how this works. I have £8500 in my HTB ISA and want to transfer to a LISA. I know that the maximum pay-in of a LISA per year is £4000. I also know that I can only have 1 ISA per tax year. If I get a LISA, I can transfer in £4000 which leaves me with £4500 in an ISA I'm not able to have. I also know I shouldn't take money out of the ISA or I lose the government payment benefit. So I'm really unsure how I'm supposed to go about swapping from one to the other.
Thanks for any advice offered!
Chris
This may be pretty obvious but I can't get my head around how this works. I have £8500 in my HTB ISA and want to transfer to a LISA. I know that the maximum pay-in of a LISA per year is £4000. I also know that I can only have 1 ISA per tax year. If I get a LISA, I can transfer in £4000 which leaves me with £4500 in an ISA I'm not able to have. I also know I shouldn't take money out of the ISA or I lose the government payment benefit. So I'm really unsure how I'm supposed to go about swapping from one to the other.
Thanks for any advice offered!
Chris
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Comments
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A misconception, albeit not an uncommon one.I also know that I can only have 1 ISA per tax year.
The actual overall rule is that you can pay new money into one ISA of each type in any given tax year.
While transfers normally circumvent this by not counting as new money, there is an additional constraint on LISAs that means you can only put £4K into a LISA in a tax year even if you're transferring from a non-lifetime ISA.
So, in your case you can shift £4K from HTB to LISA by 5 April and another £4K after 6 April, leaving £500 in your HTB that couldn't go into the LISA until April 2020. However, given that LISAs need to be open for a year before (penalty-free) use towards a first property, that's presumably not too much of an issue?0 -
A misconception, albeit not an uncommon one.
The actual overall rule is that you can pay new money into one ISA of each type in any given tax year.
While transfers normally circumvent this by not counting as new money, there is an additional constraint on LISAs that means you can only put £4K into a LISA in a tax year even if you're transferring from a non-lifetime ISA.
So, in your case you can shift £4K from HTB to LISA by 5 April and another £4K after 6 April, leaving £500 in your HTB that couldn't go into the LISA until April 2020. However, given that LISAs need to be open for a year before (penalty-free) use towards a first property, that's presumably not too much of an issue?
Thanks for the helpful reply. This leads me to a further problem. If I do as you suggest and put £4000 into a LISA before April 5th and another £4000 in after, this will mean I've reached my limit until April 2020. If I understand this correctly, it would mean I can't put any more money into an ISA until that date, correct? I'm effectively losing out on a lot of the government interest then aren;t I?
For example by swapping the money over, I'll have £8000 in the LISA by say 8th April, but without the ability to put any more in.
By not swapping it, I'll still be able to put money into my HTB ISA way after 5th April, thereby earning more government interest.
Am I missing something here, or does it sound like I shouldn't be swapping it over? Sorry, I'm really having trouble figuring this out, not very good at maths!
Cheers!0 -
The £4000 limit applies only to Lifetime ISAs, there is a more general £20,000 limit that applies across ISAs of different types and you won't have reached that limit. So you can continue to fund your HTB ISA after filling your LISA.Thanks for the helpful reply. This leads me to a further problem. If I do as you suggest and put £4000 into a LISA before April 5th and another £4000 in after, this will mean I've reached my limit until April 2020. If I understand this correctly, it would mean I can't put any more money into an ISA until that date, correct? I'm effectively losing out on a lot of the government interest then aren;t I?0 -
Ask eskbanker said:
The actual overall rule is that you can pay new money into one ISA of each type in any given tax year.
So the HTB ISA is a different type to the LISA meaning I can pay into both in a given year? When I eventually buy a house though I'll only be able to use the bonus from one of them won't I? So at some point I'll have to put the HTB into the LISA when I plan to buy?0 -
Just to confirm then, this is how I would do it and it would work:
Now: HTB ISA has £8294. Open LISA and transfer £4000 in from HTB ISA
6th April 2019: Transfer another £4000
Save £200 a month into HTB ISA
6th April 2020: Transfer in the HTB ISA again and top it up to another £4000 = £12,000.
Just thinking though, if I can only use the 25% government bonus on 1 of them, there's no use in saving £200 a month into a HTB ISA specifically is there? I can just put it into any account and transfer it into the ISA on 6th April 2020 right? The HTB ISA effectively becomes useless once I open the LISA.0 -
Just to confirm then, this is how I would do it and it would work:
Now: HTB ISA has £8294. Open LISA and transfer £4000 in from HTB ISA
6th April 2019: Transfer another £4000
Save £200 a month into HTB ISA
6th April 2020: Transfer in the HTB ISA again and top it up to another £4000 = £12,000.
Just thinking though, if I can only use the 25% government bonus on 1 of them, there's no use in saving £200 a month into a HTB ISA specifically is there? I can just put it into any account and transfer it into the ISA on 6th April 2020 right? The HTB ISA effectively becomes useless once I open the LISA.
It doesn't become useless if you use your Help to Buy ISA as a regular savings account. The interest on these normally outweigh interest on LISAs. If I was you I would transfer 4k before April 2019, keep building up the money in HTB ISA for the next tax year (as well as utilising other high interest savers) and then transfer another 4k before April 2020. Then either transfer the rest in straight after the new tax year starts in April 2020 for piece of mind or repeat the process until you're ready to buy to gain maximum interest on your savings.0 -
It doesn't become useless if you use your Help to Buy ISA as a regular savings account. The interest on these normally outweigh interest on LISAs. If I was you I would transfer 4k before April 2019, keep building up the money in HTB ISA for the next tax year (as well as utilising other high interest savers) and then transfer another 4k before April 2020. Then either transfer the rest in straight after the new tax year starts in April 2020 for piece of mind or repeat the process until you're ready to buy to gain maximum interest on your savings.
But the HTB ISA only gives low interest, so wouldn't I be better off saving money in S&S ISA and transferring into the LISA each year? That way I can earn more interest on the money before transferring it into the LISA and getting the 25%? I have to say, I haven't a clue about any of this so I'm trying to muddle my way through and work out the best way to save towards a deposit.0 -
HTB ISAs tend to pay better interest than comparable cash deposit accounts, in that you can get 2.5%, although with £200 a month you can beat that in some regular saver accounts.But the HTB ISA only gives low interest, so wouldn't I be better off saving money in S&S ISA and transferring into the LISA each year? That way I can earn more interest on the money before transferring it into the LISA and getting the 25%? I have to say, I haven't a clue about any of this so I'm trying to muddle my way through and work out the best way to save towards a deposit.
Don't go anywhere near S&S ISAs if you're saving for a house - investing should only be considered for long-term (7-10+ years) accumulation, as it's entirely possible that your capital would lose value over shorter timescales, so stick to cash deposits in savings accounts....0 -
My son is 16 and I am looking to open a Htb isa for him to gain government bonus. Will He lose any bonus if I then transfer the Htb ISA funds to a LISA when he is 18?0
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No Government bonus is paid on HTB ISAs until they are used for a house purchase. So if you open a HTB ISA with the intention of transferring to a LISA in the future, there is no bonus to be lost. The transfer is also limited to the annual LISA limit of £4000, so if the balance of the account is, say £5,800, the money would need to be transferred in two tranches across 2 tax years. The money transferred would receive the Government bonus the month after being transferred to the LISA, just the same as for new money being paid directly into the LISA.My son is 16 and I am looking to open a Htb isa for him to gain government bonus. Will He lose any bonus if I then transfer the Htb ISA funds to a LISA when he is 18?
On a pedantic point, you cannot open this type of ISA for your son. Nor can you transfer the funds within it. Only he can open an adult ISA such as a HTB ISA in his name, and he would likely be breaking the T&Cs of the account if he gave you access to it or control over it without granting you power of attorney, which he cannot do until he is 18.0
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