Withdraw from HTB-ISA to pay in to LISA?

My brother has paid in to a HTB-ISA which now totals £5.6k. The plan is to transfer this over to a Skipton cash LISA as after April it'll be counted as new money (& therefore over the £4k per year allowance).

That bit is fairly straight forward but i was wondering about my sister. She was going to do the same but i'm wondering if it's actually best she doesn't.

She doesn't earn as much and has only fairly recently gone full time. As a result her HTB ISA is only £1.3k.

Where he's paying in £200pm she was only managing £40-£50. So i was thinking could it be best to (at least for the first year) leave the HTB ISA money where it is, set aside £50pm (hopefully more but for now £50) which would be £600+ interest (not much) which takes the pot to £1.9k.

She could do the same the year after too really and make that £2.5k. At this point (for example) she could withdraw the whole lot, put it in to a cash LISA.


I know that does away with many peoples thinking of eating in to your allowance - but if she isn't going to hit the £4k allowance any time soon (even by combining numerous years worth of subscriptions) and she's not going to come close to the personal allowance of £20k (or whatever it is at the time)

then is there a good reason to transfer over to a cash LISA now and NOT do what i just said?


Just thinking this because HTB ISA currently sitting at 3.5% whereas cash LISA is 0.5%.

Comments

  • Alexland
    Alexland Posts: 9,653
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    Yes at your sister's rate of saving there is not much advantage unless her saving rate is likely to increase above the HTB rate or she would be buying a property outside London above the HTB limit but within the LISA limit, but with such a small deposit this seems unlikely unless she is expecting a windfall from somewhere.
  • Ed-1
    Ed-1 Posts: 3,867
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    My brother has paid in to a HTB-ISA which now totals £5.6k. The plan is to transfer this over to a Skipton cash LISA as after April it'll be counted as new money (& therefore over the £4k per year allowance).

    That bit is fairly straight forward but i was wondering about my sister. She was going to do the same but i'm wondering if it's actually best she doesn't.

    She doesn't earn as much and has only fairly recently gone full time. As a result her HTB ISA is only £1.3k.

    Where he's paying in £200pm she was only managing £40-£50. So i was thinking could it be best to (at least for the first year) leave the HTB ISA money where it is, set aside £50pm (hopefully more but for now £50) which would be £600+ interest (not much) which takes the pot to £1.9k.

    She could do the same the year after too really and make that £2.5k. At this point (for example) she could withdraw the whole lot, put it in to a cash LISA.


    I know that does away with many peoples thinking of eating in to your allowance - but if she isn't going to hit the £4k allowance any time soon (even by combining numerous years worth of subscriptions) and she's not going to come close to the personal allowance of £20k (or whatever it is at the time)

    then is there a good reason to transfer over to a cash LISA now and NOT do what i just said?


    Just thinking this because HTB ISA currently sitting at 3.5% whereas cash LISA is 0.5%.

    The Skipton cash LISA is now 0.75%.
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