Help to Buy ISA guide

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  • andrewthomas2008
    andrewthomas2008 Posts: 164 Forumite
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    Am I correct in thinking that the only way of contributing both the help to buy isa and life time ISA separately is by using one of the providers like Nationwide or NatWest that give you the abilitu to split allowance.

    As I'd like to use once for a property purchase and one to save towards to pension.
    Girlie Girl
  • Lingua
    Lingua Posts: 208 Forumite
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    andrewthomas2008 wrote: »
    Am I correct in thinking that the only way of contributing both the help to buy isa and life time ISA separately is by using one of the providers like Nationwide or NatWest that give you the abilitu to split allowance.

    As I'd like to use once for a property purchase and one to save towards to pension.


    Would it not be better to just transfer the HTB ISA into a Lifetime ISA once it is released? You can use your Lifetime ISA to buy a house and, if I am right in my memory, can continue to save into it afterwards for a pension.


    Lingua
    Long-Term Goal: £23'000 / £40'000 mortgage downpayment (2020)
  • Archi_Bald
    Archi_Bald Posts: 9,681 Forumite
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    I agree, it could be a better move to transfer the HTB into the LISA in 2017-18. http://blog.moneysavingexpert.com/2016/04/01/the-help-to-buy-isa-v-lifetime-isa-which-should-first-time-buyers-get/
  • andrewthomas2008
    andrewthomas2008 Posts: 164 Forumite
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    Lingua wrote: »
    Would it not be better to just transfer the HTB ISA into a Lifetime ISA once it is released? You can use your Lifetime ISA to buy a house and, if I am right in my memory, can continue to save into it afterwards for a pension.


    Lingua

    So can use use the balance to buy a house and then leave it open to continue saving in the form of a pension?
    Girlie Girl
  • grey_gym_sock
    grey_gym_sock Posts: 4,508 Forumite
    edited 10 April 2016 at 7:18PM
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    andrewthomas2008 wrote: »
    So can use use the balance to buy a house and then leave it open to continue saving in the form of a pension?

    yes. which means you can decide how much to put towards the house when you're buying, rather than having to use however much you have in the HTB ISA for the house, and everything in the LISA as a pension.

    1 downside of the LISA is that there is a 5% penalty if you take money out before you're 60 and you're not using it to buy your first home. with HTB ISA, there's no penalty if you don't use it for a house (just no bonus).

    an issue with dual-use LISA is that you probably want your house deposit money in cash, but it's a bad idea to keep all your pension in cash. a pension should be mostly invested, which is likely to give much higher returns than cash, when your perspective is over several decades.

    another question is: should you be using a LISA as a pension, or a normal pension instead? in terms of the value of the bonus / tax relief, a normal pension is usually better if there are matching employer contributions available, or if you are a higher/additional rate taxpayer, or if you have access to a salary sacrifice scheme. in other cases, LISA is usually better - at least in terms of the bonus / tax relief. having a LISA can also affect your entitlement to means-tested benefits, in circumstances when a normal pension wouldn't.
    andrewthomas2008 wrote: »
    Am I correct in thinking that the only way of contributing both the help to buy isa and life time ISA separately is by using one of the providers like Nationwide or NatWest that give you the abilitu to split allowance.

    and, to answer your original question: no. from next year, you'll be allowed to pay new money to 1 of each of 4 different kinds of ISA:
    a) cash ISA (which include HTB ISA)
    b) stocks & shares ISA
    c) IF ISA
    d) LISA
  • dieffenbachia
    dieffenbachia Posts: 2 Newbie
    edited 10 April 2016 at 9:06PM
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    The guide was very informative but a few things remain unclear to me.
    1) Is the max amount you can save in your HTB ISA in your first year is £3400 and then £2400 every year after that?
    2) Do you need to have a split HTB and cash ISA to be able to use your entire £15,240 allowance (unless you have a S&S ISA)?
    3) Can you merge a previous years' S&S ISA into a previous years' cash ISA to benefit from interest (albeit pitiful) as opposed to zero interest in S&S ISA, even while holding an HTB ISA?
    4) Can you transfer out of an HTB ISA into a cash ISA at any time? (I'm aware doing so means you will lose the Government bonus on any amount transferred)
    5) In the same tax year, can you transfer previous years' cash ISAs to new cash ISA to take advantage of better rates and save in /open an HTB ISA?
  • dieffenbachia
    dieffenbachia Posts: 2 Newbie
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    jimjames wrote: »
    No you're not! There is another far better option, just open HTB ISA now. There is absolutely no need to open a normal cash ISA at all if you are saving to buy a house. HTB ISA pays the best rate and then remaining savings can be in current accounts.

    Hi jimjames, I'm a bit confused because surely one reason to have a normal cash ISA as well as an HTB ISA is to save > £2400 in any one year (apart from the first year when I understand you can deposit max £3400 in the HTB ISA)? Where would you save up to £12840 remainder of your yearly allowance?
    Even though the interest rates are pitiful in cash ISAs at the moment, isn't the interest worth it for certain amounts of savings of previous years' allowances?
  • Rich2808
    Rich2808 Posts: 1,332 Forumite
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    andrewthomas2008 wrote: »
    Am I correct in thinking that the only way of contributing both the help to buy isa and life time ISA separately is by using one of the providers like Nationwide or NatWest that give you the abilitu to split allowance.

    As I'd like to use once for a property purchase and one to save towards to pension.

    You can actually fund your Nationwide help to buy isa entirely with prior year isa funds - just moving the £1200 lump sums and then £200 monthly via an isa transfer. It's easier if it's from another NW isa as it happens within 24 hours.. You can then invest in a different cash isa with another provider for the current year.
  • thereach
    thereach Posts: 1 Newbie
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    I was wondering if anyone could help me - my wife and I are hoping to buy a house next year. I'm a first time buyer but she is not. The house we'd like to get is likely to cost a little over £250k (outside London). If it did cost more than £250k, does anyone know whether I'd still be able to get the 25% bonus because I'm only buying half of it (essentially)?

    Thanks!
  • masonic
    masonic Posts: 23,437 Forumite
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    thereach wrote: »
    I was wondering if anyone could help me - my wife and I are hoping to buy a house next year. I'm a first time buyer but she is not. The house we'd like to get is likely to cost a little over £250k (outside London). If it did cost more than £250k, does anyone know whether I'd still be able to get the 25% bonus because I'm only buying half of it (essentially)?

    Thanks!
    The value of the property is what matters, but next year you could use a LISA instead, which has a £450k limit rather than £250k.
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