Lifetime ISAs guide

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  • I think a lot of people will fall foul of the rules by that. Despite it being technically not allowed, HMRC etc aren't going to penalise - it's not like you've tried to put 3 or 4k in each then combine them!

    I opened with £1, although I think there was a option to open with £0 and transfer in. IMO Skipton could make that a bit clearer, as there was a message saying something along the lines of "your account isn't open until you pay in".

    Although that is technically correct, I think it should be clarified by Skipton that people are ok to open on £0 and have X days to transfer in....


    Out of interest - and I don't think it'd ever get to this stage - what's the penalty for failing to comply with ISA rules...???
  • Update on my transfer in to Skipton - I sent them both together. Both arrived @ Skipton on 13th.

    Text regarding my "Lifetime ISA Transfer" on 13th, which is linked to Barclays one. Identical text and email on 14th, which appears to be my Nutmeg one.

    Both are listed in Skipton Online -> Manage Account -> Pay in -> Stocks & Shares ISA.

    Strangely Barclays is valued at £0 (updated 13/6). Nutmeg was valued @ £0, updated 13/6. It's now valued at the princely sum of £0.01, updated 13/6.

    Barclays H2B ISA had a full transfer out completed on 15th (which due to way Barclays system operates, put me overdrawn as closing interest isn't credited to statement!).

    It's now completely disappeared from my online banking, so I presume Skipton will credit it early next week.

    Lifetime ISA at Nutmeg - no update, and no changes at Nutmeg's end.
  • System
    System Posts: 178,077
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    Exactly... To all of the above.

    I'd even enquired regarding the Skipton LISA with a few questions and the advisor said to open it with a zero balance and then transfer in (sure, that's what I'd aimed to do anyway...) - but was there an option for this..? No... And exactly as you say above "your account isn't open until you pay in."

    So got on the blower earlier as soon as I'd realised I now have 2 LISAs technically open (even though I intend to transfer one to t'other to only have one....) and the advisor said they didn't think it would be an issue IF transferring. They confirmed with someone else that shouldn't have 2 LISAs in same tax year -- but my understanding (and theirs) of this would mainly to be the avoision of racking up different 1K bonuses from different LISAs ... However, I don't want to get to the point of next May only for the petty HMRC that we all know are so friendly, helpful and forgiving to refuse a hefty 25% bonus just because of this 'technacaility' -- for this reason I think I shall close my Skipton account (within the 30 day grace period; which states that "if done-so in this time period will not count as a current tax year LISA subscription") think that's the safest bet even when people on the phone are telling you different/attempting to reassure -> where will they be next May when you're being refused a bonus because of some annoying factor such as this...?

    Infuriating!

    Surely, Skipton should have 'blocked' my application/initial £1 deposit in reality then? Why can't something flag up from your (required) NI number with a warning saying you're already subscribed to a current tax year LISA, it is 2017 afterall....
  • System
    System Posts: 178,077
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    eskbanker wrote: »
    No, it's not OK - you're allowed to pay current year subscriptions into one and only one of each ISA type, where the types are:
    Cash (including HTB)
    S&S
    LISA
    IFISA

    So, you're definitely not allowed to pay into two LISAs in the same tax year! The fact that they're both for small amounts doesn't change this....


    So in reality, what's the penalty for this ?

    And if it's that big of a no-no and Skipton were expecting so many S&S transfers-in ; why hadn't they made it clearer / included an option to simply open with a zero balance ...

    Didn't want to throw the entire application away based on the "your account isn't open until....etc."
  • I was tempted to close my Skipton account, then re-open with zero and transfer into that account (from memory I *think* you're allocated an account number, despite seeing the "your account isn't open until it's funded" screen).

    Howver, I'd already sent the forms off for my H2B & LISA transfers by the time I read on here that it was, technically speaking, an issue. So it'd cause more problems if I cancel in the grace period, given that two products are transferring in.

    As the bonus isn't credited until 2018, I imagine there won't be any issue at all, as long as you don't go over the max limit.

    I also imagine the bonuses are applied for and credited in bulk. E.g. Skipton declare to HMRC that they have -

    "1,000 correctly funded & conforming LISAs, with KYC checks completed & NI numbers obtained.... within these is a total aggregate balance of (say) £3.5m, therefore we would like the £750k bonus, which we will divvy out to the account holders as per the rules..."

    Even if HMRC track per NI number, I guess it'll be something like

    1: NI XX XX XX XX A. Saved - £4,000. Claim - £1,000
    2: NI XX XX XX XX B. Saved - £4,000. Claim - £1,000

    etc. By that stage, the issue of overlapping deposits is long gone.

    Skipton won't want to flag anyone up they become aware of, because their CS would become inundated with complaints - two in this thread alone!
  • System
    System Posts: 178,077
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    Well, exactly... This was my (and the CSA's) thinking; that it'll all be hunkydory so long as you don't go over the allowance limit for the year (plus transferring one into the other means they sum to 1 upon the other closing anyways -- and if it was that big of a deal, Skitpon would have a facility blocking it or the option to open without deposit or wouldn't allow deposits in if you had announced you already had a funded LISA - which have only been made available as of THIS tax year... Etc.etc.etc.)
  • isasmurf
    isasmurf Posts: 1,999
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    Out of interest - and I don't think it'd ever get to this stage - what's the penalty for failing to comply with ISA rules...???
    NevvyC wrote: »
    So in reality, what's the penalty for this ?

    When HMRC run their compliance programme after the end of the tax year and discover invalid ISAs, after confirming their discovery with you, they will issue a discovery notice to the ISA provider. This will inform them to treat the invalid subscriptions as if they weren't in an ISA. This means any income or growth from them will be taxable. Lifetime ISA bonuses will also be repaid to HMRC.

    HMRC can "repair" invalid subscriptions that are within the annual allowance by instructing the ISA manager of a date from which the invalid subscriptions can restart having an ISA tax exemption.

    Where over the annual allowance HMRC will instruct the ISA provider to remove subscriptions that are over the £20k/£4k allowance.


    However, when you transfer current year subscriptions in an ISA, those subscriptions are treated as having been made with the new ISA manager, and never with the original ISA manager. Indeed, if the old ISA is fully transferred to another ISA manager it will not be included in the end of year reporting to HMRC and so as far as HMRC are concerned you only hold the one ISA.
  • Kami_J
    Kami_J Posts: 17
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    I know the S&S are more volatile than cash, but with inflation as it is, Skipton's 0.5% is a losing game. I picked the lowest risk profile on Nutmeg, so I am thinking that in the worst case, I will lose a little bit, but potentially can gain a bit more - but overall the swing in either direction won't be much so why bother with switching? Am I missing something?
    ” Stock market crash next week, month? Pound sinks 20%. Political instability grows?

    Something unexpected can cause major changes in investments over a year or so.

    You are happy to take this risk because Skipton are only paying 0.5% ?

    I think you missed the bit where I only transfer the lot into Nutmeg in March 2018. Both my FD 5% regular saver and the current HTB beat Skipton's 0.5%.

    If I withdraw shortly after, the Nutmeg should be just as good as Skipton? And if I decide to wait another few months, I can then take my pick of possible cash LISAs in April 2018?
  • lpyy
    lpyy Posts: 114
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    eskbanker wrote: »
    No, it's not OK - you're allowed to pay current year subscriptions into one and only one of each ISA type, where the types are:
    Cash (including HTB)
    S&S
    LISA
    IFISA

    So, you're definitely not allowed to pay into two LISAs in the same tax year! The fact that they're both for small amounts doesn't change this....

    If I open a cash LISA now with £1 to get the clock ticking [as the account is not fully open until it's paid!], and continue to pay £200 into HTB every month until Dec (?) 17, then transfer the whole balance from HTB to LISA. Could I in this case be able to open another normal cash ISA in Dec 17 and contribute into both LISA and Cash ISA in the same tax year, as long as the total <= £20,000?

    Any inputs would be greatly appreciated!
  • System
    System Posts: 178,077
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    isasmurf wrote: »
    When HMRC run their compliance programme after the end of the tax year and discover invalid ISAs, after confirming their discovery with you, they will issue a discovery notice to the ISA provider. This will inform them to treat the invalid subscriptions as if they weren't in an ISA. This means any income or growth from them will be taxable. Lifetime ISA bonuses will also be repaid to HMRC.

    HMRC can "repair" invalid subscriptions that are within the annual allowance by instructing the ISA manager of a date from which the invalid subscriptions can restart having an ISA tax exemption.

    Where over the annual allowance HMRC will instruct the ISA provider to remove subscriptions that are over the £20k/£4k allowance.


    However, when you transfer current year subscriptions in an ISA, those subscriptions are treated as having been made with the new ISA manager, and never with the original ISA manager. Indeed, if the old ISA is fully transferred to another ISA manager it will not be included in the end of year reporting to HMRC and so as far as HMRC are concerned you only hold the one ISA.


    Great. Thanks for the insight...

    So to confirm, essentially there will be no negative repercussions if a current tax year LISA with subscriptions is transferred (and closed) to another current tax year LISA also with subscriptions...?

    As on paper it will just appear as £100 & £1 paid into the same LISA in May & June, respectively...

    Thanks
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