What to do with our savings? LISA and HTBISA
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BigBoss
Posts: 170 Forumite
I live with my partner and we've just become debt free. Our household income is approx 80k and we're looking to start some effective savings for the future (and potentially buy a house).
We are looking to maximise what we can earn on top of what we save, which is about 833 pcm each (1666 total) and have thought about opening both (each) so we have a total of 4 ISAs between us.
Will this work? Can we hold separate Lisas and combine them to buy a house (up to 450k)?
Is there something we're missing that won't allow us to maximise our savings like this, or is there a better way?
The slight snag to all of this, is that we don't know whether we are going to remain in the UK long term, so after 5 years of saving in a LISA (where we would presumably have 45k), could we then use that LISA money to buy (say) a 1bed flat in London, then let it out (if we've moved abroad)?
We are looking to maximise what we can earn on top of what we save, which is about 833 pcm each (1666 total) and have thought about opening both (each) so we have a total of 4 ISAs between us.
Will this work? Can we hold separate Lisas and combine them to buy a house (up to 450k)?
Is there something we're missing that won't allow us to maximise our savings like this, or is there a better way?
The slight snag to all of this, is that we don't know whether we are going to remain in the UK long term, so after 5 years of saving in a LISA (where we would presumably have 45k), could we then use that LISA money to buy (say) a 1bed flat in London, then let it out (if we've moved abroad)?
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Comments
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Yes, you can combine your LISAs if you buy a UK home together and live in it.We are looking to maximise what we can earn on top of what we save, which is about 833 pcm each (1666 total) and have thought about opening both (each) so we have a total of 4 ISAs between us.
Will this work? Can we hold separate Lisas and combine them to buy a house (up to 450k)?
Perhaps using a LISA is not the best plan if there is a real possibility of you deciding to live outside the UK within the next 5 years. You might be better off making use of normal savings accounts and making use of your personal savings allowance that would allow you to receive (probably all of the) interest tax free.Is there something we're missing that won't allow us to maximise our savings like this, or is there a better way?
No, you are specifically prevented from making a penalty free withdrawal from a LISA to fund a BTL or a home that you do not plan to live in. You could still make the withdrawal subject to the 25% penalty, which reverses the 25% bonus and costs about 6.25% on top. If there's only a slight chance that you would leave the UK within 5 years, as opposed to say buying a home in the UK, living there for a few years and then deciding to relocate, then it might be worth the risk.The slight snag to all of this, is that we don't know whether we are going to remain in the UK long term, so after 5 years of saving in a LISA (where we would presumably have 45k), could we then use that LISA money to buy (say) a 1bed flat in London, then let it out (if we've moved abroad)?0 -
No, you are specifically prevented from making a penalty free withdrawal from a LISA to fund a BTL or a home that you do not plan to live in. You could still make the withdrawal subject to the 25% penalty, which reverses the 25% bonus and costs about 6.25% on top. If there's only a slight chance that you would leave the UK within 5 years, as opposed to say buying a home in the UK, living there for a few years and then deciding to relocate, then it might be worth the risk.
Hi thanks for your answer.
This is 99% the likelihood. Relocation won't be for at least 5 years. So my question about buying then renting is more along the lines of "buy, live in for a while, then relocate".
Upon relocation, we would be able to let the property, right?0 -
In your first post you said indicated that you would probably buy after around five years of saving in the LISA and that you might move abroad. You have now indicated that you almost certainly will move abroad within five years. These two situations are not compatible. If you buy sooner than five years, then you won't have the lump of money from LISAs that you seem to be banking upon, and if you do wait five years then no, you cannot use a LISA with bonus. Which situation is the correct one: you will buy in the next couple of years and then move abroad circa three years later, or you will buy in five years and then move abroad?
I don't think that LISAs are the best option for you. You could make use of Help to Buy ISAs, which would allow you easier access to your money and avoid the risk of penalties. If you didn't use the savings in the Help to Buy ISA for a house purchase, then you could simply access them without any government bonus.
Your savings outside of LISAs/HTB ISAs would be best put into normal savings accounts/current accounts/regular savers, as they pay better rates of interest than you can get in a cash ISA. (If you use HTB ISAs then you can't save in the same financial year in a cash ISA anyway).0 -
It seems then that you've expressed a fairly certain plan to buy a BTL property in the UK and live abroad.Hi thanks for your answer.
This is 99% the likelihood. Relocation won't be for at least 5 years. So my question about buying then renting is more along the lines of "buy, live in for a while, then relocate".
Upon relocation, we would be able to let the property, right?
You would be required to make a false declaration in order to make the withdrawal from your LISAs, and while HMRC possibly couldn't prove your intentions at the time, I think you'd be taking a risk in doing as you suggest.0 -
It seems then that you've expressed a fairly certain plan to buy a BTL property in the UK and live abroad.
You would be required to make a false declaration in order to make the withdrawal from your LISAs, and while HMRC possibly couldn't prove your intentions at the time, I think you'd be taking a risk in doing as you suggest.
They'd need a buy to let mortgage, and so couldn't access the LISA. If they used a regular mortgage to try and get round this then there is a good chance that the mortgage company would find out and they would then find themselves in trouble for committing mortgage fraud. HMRC would likely also take an interest.0 -
You would be required to make a false declaration in order to make the withdrawal from your LISAs, and while HMRC possibly couldn't prove your intentions at the time, I think you'd be taking a risk in doing as you suggest.
Or...we remortgage the house and get a BTL mortgage. Surely you're not telling me that a LISA stipulates that you must buy a house to live in forever more, and that you must never leave the UK?0 -
"The withdrawal must be for a property for the first time buyer to live in as their only residence and not buy-to-let"Or...we remortgage the house and get a BTL mortgage. Surely you're not telling me that a LISA stipulates that you must buy a house to live in forever more, and that you must never leave the UK?
What I think is irrelevant. It's what HMRC thinks that matters, which is why I said I think you'd be taking a risk in doing as you suggest. You've stated your intention quite clearly here so whatever you do and whatever the consequences, you're considering defrauding the taxpayer and trying to coerce others into helping you get away with it by probing what you'd need to do so as not to arouse suspicion.
If you really aren't trying to do anything dishonest, then you can get an official answer by phoning HMRC, explaining your situation honestly and following their advice.0 -
"The withdrawal must be for a property for the first time buyer to live in as their only residence and not buy-to-let"
What I think is irrelevant. It's what HMRC thinks that matters, which is why I said I think you'd be taking a risk in doing as you suggest. You've stated your intention quite clearly here so whatever you do and whatever the consequences, you're considering defrauding the taxpayer and trying to coerce others into helping you get away with it.
Intention? I've stated a possible plan for the future lol. I have no intention of breaking any law, hence me asking on this forum in the first place.
Re the emboldened part, it doesn't give any time period, so this is why I asked. I do find it bizarre however, that the government would care if we bought a house, then 5>10>15 years later decided to move abroad and in turn remortgaged it with a BTL mortgage. My partner and I are not plotting some greedy scheme to lie about buying a house under a normal mortgage then let it out. :money::beer:
I just found this: Which answers my questions anyway. I will trawl the main site in future, before coming to ask on here: https://blog.moneysavingexpert.com/2016/04/can-you-rent-out-a-home-bought-with-a-help-to-buy-isalifetime-isa/?_ga=2.142467058.1154142427.1494025865-1238645449.1464001411
The government's response in that link does seem to point more towards H2B though, so I might contact them myself and ask for clarification if the same rules apply with LISAs.0 -
In your first post, it was a possible plan to move abroad within 5 years, then it became a 99% plan to stay in the UK for 5 years, then move abroad, then you started querying how many years you'd have to live in the house before turning it into a BTL. So I won't apologise for smelling a rat.Intention? I've stated a possible plan for the future lol. I have no intention of breaking any law, hence me asking on this forum in the first place.
They don't give a specific rule because it makes it easier for people to game the system. It's a bit like how deprivation of assets rules are applied to people seeking care home funding from their local authority.Re the emboldened part, it doesn't give any time period, so this is why I asked. I do find it bizarre however, that the government would care if we bought a house, then 5>10>15 years later decided to move abroad and in turn remortgaged it with a BTL mortgage. My partner and I are not plotting some greedy scheme to lie about buying a house under a normal mortgage then let it out. :money::beer:
There are people who take schemes like this and use them to make money with no need of them for their intended purpose.
As far as the legislation is concerned, the wording and definitions are almost identical, so it is very unlikely different tests would be applied to HTB ISA bonus money and LISA bonus money.The government's response in that link does seem to point more towards H2B though, so I might contact them myself and ask for clarification if the same rules apply with LISAs.0 -
Intention? I've stated a possible plan for the future lol. I have no intention of breaking any law, hence me asking on this forum in the first place.
Re the emboldened part, it doesn't give any time period, so this is why I asked. I do find it bizarre however, that the government would care if we bought a house, then 5>10>15 years later decided to move abroad and in turn remortgaged it with a BTL mortgage. My partner and I are not plotting some greedy scheme to lie about buying a house under a normal mortgage then let it out. :money::beer:
I just found this: Which answers my questions anyway. I will trawl the main site in future, before coming to ask on here: https://blog.moneysavingexpert.com/2016/04/can-you-rent-out-a-home-bought-with-a-help-to-buy-isalifetime-isa/?_ga=2.142467058.1154142427.1494025865-1238645449.1464001411
The government's response in that link does seem to point more towards H2B though, so I might contact them myself and ask for clarification if the same rules apply with LISAs.
As I've said previously, you have presented two mutually incompatible scenarios (and have refused to clear up the discrepancy, despite being asked to). This does suggest that you are looking for ways to get round the rules, and in so doing, defraud the taxpayer.
If you don't like people's honest and informed advice then you would be well-advised not to post here. Just because you don't like an answer, it doesn't mean that answer is wrong.0
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