Property over 250k. Moving H2B to LISA.

JamesHarrison03 · 19 March 2019 at 9:53PM

Hello everyone,

I've been digging through the forums, and much of the internet, trying to find out the best thing to do here. So I hope I'm not asking a question that's been asked a million times before...I think I've got it right, but I'm getting pretty tangled up!

So, we've just had an offered accepted on a property, but its over 250,000. So my H2B ISA will no longer pay out of the bonus.

I have £7,934.60 in my H2B currently. My plan was to move £4,000 over to my Skipton Lifetime ISA this month (opened LISA over a year ago with a £1), to claim the 25% bonus on it. Then, after April 6th, put in the next lump to further claim the bonus on that, hopefully just before property completion.

This all seemed to make sense – but I'm wondering if I do this – will I go over my ISA contributions for this tax year? I've paid in £200 a month, each month this year. So £2,200. Does moving the £4,000 add to this?

I hope that makes sense. Thank you everybody for your help!

masonic · 19 March 2019 at 10:21PM

You have an overall £20,000 per tax year ISA allowance, so unless you've made substantial contributions to other ISAs, there is plenty of headroom for what you suggest.

The money can be moved by formal ISA transfer, in which case it wouldn't consume any more of your £20,000 allowance, but this is a slower and more complicated process. Withdrawing and paying into the LISA will work if you aren't concerned about using up more of your allowance.

One thing you should be prepared for is a delay in receiving the bonus. If you pay in before 5th April, then your bonus should arrive by the end of that month, but for the payment in the new tax year, the bonus won't arrive until late May. If this is after you complete then you would be left with a small value LISA to use for retirement or withdraw from (this time with penalty).

JamesHarrison03 · 19 March 2019 at 10:36PM

Ah that's great to hear – thank you so much for your help!

It sounds like a safer bet to put £4k in this month, and get the bonus next month – then stop there. Much better a £1000 bonus, than nothing, or money 'locked' away!

masonic · 19 March 2019 at 10:44PM

JamesHarrison03 wrote: »

It sounds like a safer bet to put £4k in this month, and get the bonus next month – then stop there. Much better a £1000 bonus, than nothing, or money 'locked' away!

Having an odd £1000 of bonus money in a LISA at the end of the process is not a bad thing. I'd be tempted to add the second £4k at the start of the next tax year as you can withdraw it almost immediately if needed for your house purchase. The bonus from that tranche will follow on later, but won't hold anything else up.

Alexland · 20 March 2019 at 4:34AM

Yes I don't see why you wouldn't add the second £4k at the start of the new tax year.

Property conveyancing often takes longer than expected (we were waiting about 6 months to complete on our current house) and even if things go quickly and the bonus is added after the property purchase withdrawal then you could transfer the £1k LISA account to a S&S LISA provider (such as AJ Bell) and invest the money for retirement and perhaps keep adding to the account over the years for further bonuses.

Alex

2Protons · 20 March 2019 at 8:54PM

It may be worth mentioning this to your solicitor that your thinking about putting a second £4k at the start of the new tax year but you won't get the government bonus until May and does he or . she think you could want until it comes through to complete on the property. As I would guess a house sale would typically takes 3 month anyway and they would be the ones dealing with your lifetime ISA anyway.

If it helps don't forget if your store you money in a cash lifetime ISA your still earning interest so presuming the interest rate stay the same (1% - this is an lifetime ISA with 1.1%) even with the 25% penalty you will only need to keep the money in the account until you earn over £250 in interest to avoid loosing what you put in (ignoring inflation of course). For £4000 + 25% of bonus (£1000) this in theory take about 7 years

masonic · 20 March 2019 at 10:12PM

2Protons wrote: »

If it helps don't forget if your store you money in a cash lifetime ISA your still earning interest so presuming the interest rate stay the same (1% - this is an lifetime ISA with 1.1%) even with the 25% penalty you will only need to keep the money in the account until you earn over £250 in interest to avoid loosing what you put in (ignoring inflation of course). For £4000 + 25% of bonus (£1000) this in theory take about 7 years

Eh? If the OP pays £4000 in on 6th April and initiates a penalty free withdrawal of the full balance of the LISA on 6th April or any date thereafter for the property purchase, then the penalty could only apply to a later withdrawal of the £1000 "free money", which is not money that was put into the LISA.

Alexland · 20 March 2019 at 10:24PM

Why keep £1k free money in a low interest cash LISA for way longer than 7 years to then pay the 25% early withdrawal penalty? Either pay the 25% penalty upfront (and only have £750 free money) or transfer to a S&S LISA and watch the money grow for 20+ years.

2Protons · 21 March 2019 at 1:38AM

Oh oops, I reused a other comment I made on this subject for someone who already had a HTB ISA and only just opened a lifetime ISA for the same reason they might go over £250k but might buy sooner than in a years time.

- Apologies I should have clarified all I was trying to say was there is a risk free (as much as you can get with a saving account) to get back the original sum back other than wait till your 60 if you don't want to invest it.

But I forgot JamesHarrison03 can withdraw it all with the property and has already had the lifetime ISA for a year.

Property over 250k. Moving H2B to LISA.

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