Help-to-buy/LISA query

AshKitch · 15 February 2019 at 11:00AM

I have read somewhere before it is possible to “roll” the balance of a help to buy ISA - including the bonus - into a Lifetime ISA. I am looking to begin saving for a house deposit and, understandably, want to maximise the amount of bonus I can receive. So, theoretically, if I saved £3000 in my first year in my help to buy ISA, receiving a £750 bonus, could I then “roll” that £3000 into the ISA and receive an additional £750 for placing a deposit on a house, turning my £3000 into £4500 (£750 bonus via the help to buy and £750 via the LISA). Or better still, roll the fulll £3750 into the LISA and receive a 25% on the £3750, giving me £4687 from saving £3000. I’m sure I am must be missing something somewhere?

Secondly, with regards to the when the bonus is paid on the LISA. I understand it is paid monthly. So if I were to pay in the maximum £ 4000 today. Would I have to wait 12 months from today to then deposit another £4000? Or could I do it at the start of the next tax year? Potentially turning £8000 into £10000 in as little as a few months?

Thanks in advance for help. I have tried to clarify these things with online searches but it doesn’t seem all that clear.

masonic · 15 February 2019 at 11:06AM

Yes you are missing something: you cannot receive the bonus on the HTB ISA unless you use it to buy a home. If you transfer it to another type of ISA instead, then the bonus is lost.

For the LISA, the bonus is paid 1-2 months in arrears, so you can deposit £8000 and receive £2000 within a few months.

AshKitch · 15 February 2019 at 11:12AM

Thank you for your help.

What is meant by this quote from The Financial Times website then?

“While it is possible to invest in both kinds of Isa and attract bonuses on both, the government says savers cannot use the bonus from both for their first home. However, it is possible to “roll” the savings from the Help-to-Buy Isa — including the government bonus — into the Lisa, which can then be used for the deposit on a home.”

With regards to the LISA, you say you can get £2000 bonus in a few months, but I thought you could only receive a maximum of £1000 per year? Is this because it’s into a new tax year like I asked?

Thanks

masonic · 15 February 2019 at 11:20AM

AshKitch wrote: »

What is meant by this quote from The Financial Times website then?

“While it is possible to invest in both kinds of Isa and attract bonuses on both, the government says savers cannot use the bonus from both for their first home. However, it is possible to “roll” the savings from the Help-to-Buy Isa — including the government bonus — into the Lisa, which can then be used for the deposit on a home.”

This refers to an old ability HTB ISAs holders had (in a previous tax year) whereby they could make a single transfer of the balance of their HTB ISA into a LISA in addition to the £4,000 allowance, and receive the bonus on it. This is no longer possible.

With regards to the LISA, you say you can get £2000 bonus in a few months, but I thought you could only receive a maximum of £1000 per year? Is this because it’s into a new tax year like I asked?

Yes, pay £4,000 into a LISA on 5th April, and another £4,000 on 6th April and you can receive £2,000 in May/June.

AshKitch · 15 February 2019 at 11:28AM

Thank you very much for clearing these things up for me.

I plan to save around £8000 per year, all being well. I would actually be better off borrowing £4000 from my parents now, placing it in a LISA, paying them back £4000 over the year. Or even a low-interest loan, paid back over 12 months, and then start depositing the other £4000 over the year into a LISA from April 6. Does this sound like a good idea?

masonic · 15 February 2019 at 11:30AM

AshKitch wrote: »

Thank you very much for clearing these things up for me.

I plan to save around £8000 per year, all being well. I would actually be better off borrowing £4000 from my parents now, placing it in a LISA, paying them back £4000 over the year and start depositing the other £4000 over the year into a LISA from April 6. Does this sound like a good idea?

If you cannot fill your LISA before the end of this tax year, and can borrow the shortfall, then yes it would be worth doing.

badger09 · 15 February 2019 at 5:33PM

masonic wrote: »

This refers to an old ability HTB ISAs holders had (in a previous tax year) whereby they could make a single transfer of the balance of their HTB ISA into a LISA in addition to the £4,000 allowance, and receive the bonus on it. This is no longer possible.

Yes, pay £4,000 into a LISA on 5th April, and another £4,000 on 6th April and you can receive £2,000 in May/June.

I wouldn't risk leaving the 1st deposit until 5th April:eek:

Alexland · 15 February 2019 at 6:13PM

masonic wrote: »

If you cannot fill your LISA before the end of this tax year, and can borrow the shortfall, then yes it would be worth doing.

I have borrowed money to fill ISA allowances in the past and found Zopa useful as you can get circa £45 via TopCashBack on the initial loan setup and then repay faster (without penalty) to save interest.

https://www.topcashback.co.uk/zopa/

Obviously there is a risk that if your income dried up then the OP would need to withdraw from the LISA paying the penalty (slightly more than the bonus) to repay the loan. Still assuming they are staying in cash then it's probably an OK risk for someone with financial control and dicipline.

If the OP borrows from their parents then I would suggest making paying them back a priority before next tax year's contributions.

Alex

Help-to-buy/LISA query

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