Saving in a H2B for a LISA

Chrisuk263
Chrisuk263 Posts: 7 Forumite
in ISAs & tax-free savings
Hi guys,

Myself and my wife are looking to save for a house deposit. I’ve opened a LISA the other day with one suggested on the MSE website, however the interest rate is 1.1%.

What I’m wondering is would it be beneficial to open a H2B ISA also and put all of our savings into this which has an interest rate of roughly 2.58% and before the end of the financial year transfer this into the LISA to take advantage of the 25% bonus.

Then repeat for the next tax year?

I know that I can’t get both 25% bonuses on both ISA’s, but taking advantage of the higher interest rate in the help to buy seemed to make sense.

Comments

  • Neil_Jones
    Neil_Jones Posts: 8,911 Forumite
    First Anniversary Name Dropper First Post
    You can only pay £1200 in month one and then £200 in every month after that in H2B.

    So while the LISA pays 1.1% it has a more generous feeding arrangement whereas H2B is capped. Don't expect to get anywhere near a three figure sum of interest on it.
  • masonic
    masonic Posts: 23,245 Forumite
    Photogenic Name Dropper First Post First Anniversary
    Some people use the HTB ISA as an additional savings account as it pays reasonably good rates. But if you aren't able to save more than £4,000 each per tax year to run the account alongside your LISA, then it probably isn't worth it.

    You'd likely do better making use of TSB/Nationwide current accounts, and/or Nationwide/First Direct/HSBC/M&S regular saver accounts paying 5% if you just want to build up your £4000 lump sum over a year before paying into a LISA.
  • Chrisuk263
    Chrisuk263 Posts: 7 Forumite
    We’re planning to save £400 a month, so would the better option be to split this between the two ISA’s OR just stick with the LISA for the full amount.

    I’ll take a look at the 5% current accounts too
  • Alexland
    Alexland Posts: 9,653 Forumite
    First Anniversary Photogenic Name Dropper First Post
    ISA allowances are based on tax years starting on 6th April rather than financial years which tend to start on the 1st of a calendar month.

    If you think a LISA meets your requirements then there is no harm keeping the money elsewhere (either in HTB ISA(s) or 5% Nationwide easy access regular saver) and then making a contribution towards the end of the tax year. I wouldn't leave it too tight incase unexpected issues occur and you miss the cut-off.

    It's harder with HSBC, First Direct and M&S regular savers as they are not easy access without penalty so you would need to align the dates. Still if you start soon it might be fine.

    Given we are near the end of the tax year now consider what you can do to make the most use of the allowance by 5th April.

    Alex
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