LISA: Using before bonus is paid

OmegaAlpha · 25 October 2019 at 7:29PM

Hi,

Thanks to a gifted deposit we are now in the middle of buying a new build and we are expecting to exchange at the end of November. To maximize the ISA allowance for this year I deposited 8k (two accounts between us) on the 14th October, skipton advised that the bonus would be paid by the 5th of December. As I don't want to delay the purchase I have advised my solicitor that we will be using the funds without the bonus. (Leaving £1 in each)

My question is, I am assuming the bonus will still be paid as this years allowance funds have been in the account between the 6th October and 5th november. Is that a correct assumption?

We'll probably withdrawal the bonus as cash once it's been paid and forfeit £500 due to the 25%

eskbanker · 25 October 2019 at 7:47PM

The bonus is paid on contributions so as soon as you've paid in then you're entitled to it.

You can make multiple withdrawals from a LISA towards a first-time property purchase so in your shoes I'd try to negotiate with your solicitor on the basis that you'll use the full amount, including the bonus, but in two tranches, the second of which will only be available a few days after exchange (but presumably still well before completion). They should be able and willing to sort something out regarding the phasing of payments....

OmegaAlpha · 25 October 2019 at 9:27PM

Good point I'll speak to my solicitor. Slightly more complex as we will also be using H2B Equity.

I guess it boils down to how much is needed to be sent to the house builder at exchange, if we can exchange with part of my overall mortgage deposit and then claim the remainder of the LISA before completion then the solicitor can send me some of the money back I provide (as long as we treat it all as wooden dollars).

Growingold · 26 October 2019 at 5:33AM

From gov.uk webiste LISA information

Buying your first home
You can use your savings to help you buy your first home if all the following apply:

the property costs £450,000 or less
you buy the property at least 12 months after you open the Lifetime ISA
you use a conveyancer or solicitor to act for you in the purchase - the ISA provider will pay the funds directly to them
you’re buying with a mortgage

By reading your post I think maybe you only opened your Lifetime ISA's this year so you don't meet the condition of buying the property at least 12 months after you open the Lifetime ISA.
You will pay 25% withdrawal charge on any money withdrawn including the Government Bonus when applied and withdrawn. So 25% of £8000 is £2000 then 25% of the government bonus of £2000 is £500 making total withdrawal charge £2500. Your deposits of £8000 + bonus of £2000 is £10000 less penalty of £2500 making £7500 which is £500 less than what you originally paid in.

LISA: Using before bonus is paid

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