Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • MSE Helen Saxon
    • By MSE Helen Saxon 16th Mar 16, 5:06 PM
    • 75Posts
    • 44Thanks
    MSE Helen Saxon
    Lifetime ISAs guide
    • #1
    • 16th Mar 16, 5:06 PM
    Lifetime ISAs guide 16th Mar 16 at 5:06 PM
    Hi!

    This is the discussion thread for the



    Click reply below to discuss. If you havenít already, join the forum to reply. If you arenít sure how it all works, read our New to Forum? Intro Guide.


    Thanks folks,
Page 78
    • MG42Maniac
    • By MG42Maniac 12th Apr 18, 2:41 PM
    • 9 Posts
    • 0 Thanks
    MG42Maniac
    For anyone interested, I got a reply back from HMRC after just one day!

    Thanks for your email.

    You are correct when you say that your Lifetime ISA must be open for 12 months in order to qualify for a charge free withdrawal for the purposes of a first time residential purchase.

    You advise that you and your partner invested in your Lifetime ISAs on 29 June 2017.


    In April 2018 your ISA manager will return this information to HMRC and the government bonus will be paid to them, on the basis of your 2017/18 subscriptions, by the end of the first week of May 2018.

    I am unsure of how long it will take for this to reach your individual accounts thereafter.

    If you then withdraw funds from your Lifetime ISA before the full 12 months from the date of your first subscription you will be charged a 25% withdrawal.

    For example

    Total 2017/18 subscriptions £4,000

    Government bonus paid May 2018 £1,000


    Withdrawal after less than 12 months £5,000

    Withdrawal charge 25% £1,250

    Investor receives £3,750

    This means that you will not suffer the loss of the government bonus but you will be subject to 25% withdrawal charge on any amount you withdraw before the full 12 months have elapsed.
    • pink_pirlie
    • By pink_pirlie 12th Apr 18, 3:23 PM
    • 146 Posts
    • 96 Thanks
    pink_pirlie
    I also got a reply today from HMRC after emailing them weeks before Easter! They must have finally got around to viewing the inbox.

    What they said to you aligns with my understanding.
    They didnít really answer my questions which is annoying. So Iím really happy you got clarification of what you asked.

    Unfortunately I think you are going to suffer the withdrawal penalty unless you can source some or all the exchange deposit money elsewhere and then withdraw from the ISA after the 1 year, or your seller will agree a smaller exchange deposit and you only need to partially withdraw from the LISA.
    • gssaggu1
    • By gssaggu1 12th Apr 18, 5:39 PM
    • 2 Posts
    • 0 Thanks
    gssaggu1
    Hi all,

    General LISA question which I wasn't able to find an answer to:

    What happens if you've saved into a LISA and the house price you find exceeds £450k (e.g. £455k)? Do you get penalised or can you simply use the money from the LISA without the bonus if it's still towards buying a house? I'm slightly apprehensive about this prospect because, if it cannot be used, then you're resigned to keeping it for retirement or face a penalty withdrawal charge.

    More specifically

    I'm deliberating about how best to proceed; my partner and I each have existing H2B ISAs started from the previous financial year (annoyingly we missed the transfer over period for LISA of this financial year whereby transfers didn't eat into the 4k limit!). We're aiming to buy in 2-3 years realistically. We're in the process of signing up to Skipton Cash ISA and were about to transfer the H2B ISA into it, but stopped - acknowledging that we would be using the majority of the financial amount for this year (~3.4k of the £4k allowance) and giving us some thinking time.

    Given the above circumstances I was wondering what you might suggest:

    Scenario A - Transfer H2B into LISA and leave it as that
    Scenario B - Keep both open and continue to top both up (which if done would leave me asking: what would happen later down the line when more than 4k is in H2B ISA and therefore cannot be transferred into the LISA due to the annual 4k limit? Does the surplus get sent to your current account?)

    TIA!!!
    • eskbanker
    • By eskbanker 12th Apr 18, 5:59 PM
    • 6,846 Posts
    • 7,095 Thanks
    eskbanker
    What happens if you've saved into a LISA and the house price you find exceeds £450k (e.g. £455k)? Do you get penalised or can you simply use the money from the LISA without the bonus if it's still towards buying a house? I'm slightly apprehensive about this prospect because, if it cannot be used, then you're resigned to keeping it for retirement or face a penalty withdrawal charge.
    Originally posted by gssaggu1
    LISA and HTB bonuses work in entirely different ways, which may help clarify this - with HTB you claim the bonus at the end when you're ready to buy but LISA bonuses are added to the balance as you go, monthly according to any contributions made that month, after which interest is earned on everything in the LISA. So, there is no distinction in a LISA between 'your money' and the bonuses as they're all merged together (plus interest), and therefore you can't take out just the original contributions without the bonus.

    Which is all just a long-winded (but hopefully explanatory) way of saying that even for a first-time property purchase, if it's over the £450K property price limit then you have to pay the 25% penalty (of the amount withdrawn) if you want to use money from the LISA.

    Given the above circumstances I was wondering what you might suggest:

    Scenario A - Transfer H2B into LISA and leave it as that
    Scenario B - Keep both open and continue to top both up (which if done would leave me asking: what would happen later down the line when more than 4k is in H2B ISA and therefore cannot be transferred into the LISA due to the annual 4k limit? Does the surplus get sent to your current account?)
    Originally posted by gssaggu1
    For scenario B you'd need to recognise that you can't use both a LISA (without penalty) and a HTB (with bonus) for a first-time purchase, you effectively have to choose one or the other. It's still viable to do that - many are using the LISA (with its higher annual allowance) for the penalty-free bonus, and paying into HTB solely for the interest but not the bonus. Unlike LISA, you can withdraw HTB money without penalty (albeit without bonus too) so anything you can't transfer into a LISA can simply be withdrawn.
    • an1179
    • By an1179 14th Apr 18, 7:30 AM
    • 1,702 Posts
    • 16,984 Thanks
    an1179
    What is the best way to maximise my house deposit pot using Help to buy and LISA
    I have a help to buy ISA also a LISA. For 2018/2019 tax year what is the best way to maximise my house deposit pot?

    1. can save £200 per month (total £2,400) into Halifax help to buy at 3.5% interest and transfer in February/March 2019 to Lisa having deposited the balance of £1,600 into LISA in July probably. Total into Skipton £4,000

    2. Or save £4000 into LISA in July. Interest on Skipton cash ISA is 0.75% and just use help to buy as a saving account for the high interest?

    Eventually with the intention of using the LISA to fund my deposit.

    I am thinking option 1. but just need someone better at maths to confirm.

    Thank you
    Last edited by an1179; 14-04-2018 at 7:42 AM.
    • Alexland
    • By Alexland 14th Apr 18, 7:39 AM
    • 2,237 Posts
    • 1,631 Thanks
    Alexland
    You are better making all deposits into the cash LISA towards the end of the tax year (but leaving enough time for any unexpected issues to be resolved) and saving elsewhere at a higher interest for most of the year.

    You could use your 3.5% HTB ISA or if you bank with Nationwide or Santander they have 5% instant access regular saver accounts which you may qualify for?

    Alex
    • cooldude255220
    • By cooldude255220 15th Apr 18, 10:16 PM
    • 1,073 Posts
    • 7,778 Thanks
    cooldude255220
    You are better making all deposits into the cash LISA towards the end of the tax year (but leaving enough time for any unexpected issues to be resolved) and saving elsewhere at a higher interest for most of the year.

    You could use your 3.5% HTB ISA or if you bank with Nationwide or Santander they have 5% instant access regular saver accounts which you may qualify for?

    Alex
    Originally posted by Alexland
    Is there a minimum amount of time that the money has to be in the LISA before it's used to buy a house?
    2017 MSE Wins: Kitchenaid Mini Stand Mixer | Ridgemonkey Power Pack | Bundle of Yorkshire Crisps | Vax Blade | £200 Meal for 6 at Smokehouse
    2018 Wins: Sky Q for a year | RAINS Jacket and Bag
    • Alexland
    • By Alexland 15th Apr 18, 10:39 PM
    • 2,237 Posts
    • 1,631 Thanks
    Alexland
    Is there a minimum amount of time that the money has to be in the LISA before it's used to buy a house?
    Originally posted by cooldude255220
    Yes 12 months from the initial contribution when the account was opened. Of course you would also want to wait for any bonus to be added around a month or so after each contribution date. And the withdrawal process could take a month too.
    • cooldude255220
    • By cooldude255220 15th Apr 18, 11:16 PM
    • 1,073 Posts
    • 7,778 Thanks
    cooldude255220
    Yes 12 months from the initial contribution when the account was opened. Of course you would also want to wait for any bonus to be added around a month or so after each contribution date. And the withdrawal process could take a month too.
    Originally posted by Alexland
    Okay, thank you! If my partner opens one too, would she have to co-own the house, or could it be in my sole name?
    2017 MSE Wins: Kitchenaid Mini Stand Mixer | Ridgemonkey Power Pack | Bundle of Yorkshire Crisps | Vax Blade | £200 Meal for 6 at Smokehouse
    2018 Wins: Sky Q for a year | RAINS Jacket and Bag
    • Alexland
    • By Alexland 15th Apr 18, 11:29 PM
    • 2,237 Posts
    • 1,631 Thanks
    Alexland
    Okay, thank you! If my partner opens one too, would she have to co-own the house, or could it be in my sole name?
    Originally posted by cooldude255220
    If she wants to use money from her LISA, without penalty, to support a qualifying property purchase, after the 12 month rule, she would need to be acquiring an interest in the property supported by a mortgage.

    Alex
    • cooldude255220
    • By cooldude255220 15th Apr 18, 11:53 PM
    • 1,073 Posts
    • 7,778 Thanks
    cooldude255220
    If she wants to use money from her LISA, without penalty, to support a qualifying property purchase, after the 12 month rule, she would need to be acquiring an interest in the property supported by a mortgage.

    Alex
    Originally posted by Alexland
    Okay, thank you!

    If the mortgage was in my sole name, but she got an interest in the property (i.e we were tenants in common), would that count? Or would she also have to be on the mortgage?

    Edit: It appears for Help to buy ISAs you don't, but I can't find anything confirming this applies to LISAs!

    Do I have to be on the mortgage of the property I am buying?
    In order to be eligible for a government bonus you need to be on the title deed of the property and the property must be purchased with the assistance of a mortgage. Under the Help to Buy: ISA Scheme Rules, you don!!!8217;t need to be named on the mortgage of the property, however your lender may require all individuals named on the title deed to also be named on the mortgage.
    https://www.helptobuy.gov.uk/help-to-buy-isa/faq/
    Last edited by cooldude255220; 16-04-2018 at 12:05 AM.
    2017 MSE Wins: Kitchenaid Mini Stand Mixer | Ridgemonkey Power Pack | Bundle of Yorkshire Crisps | Vax Blade | £200 Meal for 6 at Smokehouse
    2018 Wins: Sky Q for a year | RAINS Jacket and Bag
    • Alexland
    • By Alexland 16th Apr 18, 5:42 AM
    • 2,237 Posts
    • 1,631 Thanks
    Alexland
    The LISA holder needs to be taking a mortgage.

    https://www.gov.uk/lifetime-isa

    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
    As per the HTB guidance most (if not all) lenders would want to see all parties on the mortgage as it gives them authority to reposess and sell the property if the worst happens which is important to secure the loan.

    Alex
    Last edited by Alexland; 16-04-2018 at 5:59 AM.
    • cooldude255220
    • By cooldude255220 16th Apr 18, 6:42 PM
    • 1,073 Posts
    • 7,778 Thanks
    cooldude255220
    The LISA holder needs to be taking a mortgage.
    Alex
    Originally posted by Alexland
    You appear to have much more knowledge than I do abut ISAs, so I'm happy to bow to your expertise, but with respect that's not how I interpret it!

    The eligibility given for H2B ISAs and LISAs appear to be very similar (purchased with a mortgage and buying with a mortgage respectively).

    I take that to mean (as is the case with H2B LISAs) that as long as the property is subject to a mortgage, it need not be in both LISA owner's names (i.e. the test is whether the property is being bought with a mortgage, not whether the LISA holder themselves is taking a mortgage).

    Thanks for your assistance!

    Edited to add:

    Looking at schedule 1(6)(6)(a)(i) of the Individual Savings Account Regulations 1998, I'm even more certain.

    The purchase must be ... funded by a loan that will be secured by a charge over the land by way of ...a legal mortgage
    To me that doesn't required the LISA owner to be named on the mortgage.
    Last edited by cooldude255220; 16-04-2018 at 6:54 PM.
    2017 MSE Wins: Kitchenaid Mini Stand Mixer | Ridgemonkey Power Pack | Bundle of Yorkshire Crisps | Vax Blade | £200 Meal for 6 at Smokehouse
    2018 Wins: Sky Q for a year | RAINS Jacket and Bag
    • lukejackson
    • By lukejackson 16th Apr 18, 8:15 PM
    • 1 Posts
    • 0 Thanks
    lukejackson
    Use two savings accounts
    Could I use both a LISA and money from another savings account to pay for a mortgage deposit? I have recently come into some money but it would take a while to filter it all into the LISA. TIA.
    • Zorillo
    • By Zorillo 16th Apr 18, 9:34 PM
    • 92 Posts
    • 53 Thanks
    Zorillo
    Yes you can but the LISA needs to be open for 12 months to use the bonus.
    • Alexland
    • By Alexland 16th Apr 18, 9:58 PM
    • 2,237 Posts
    • 1,631 Thanks
    Alexland
    I take that to mean (as is the case with H2B LISAs) that as long as the property is subject to a mortgage, it need not be in both LISA owner's names (i.e. the test is whether the property is being bought with a mortgage, not whether the LISA holder themselves is taking a mortgage).

    Looking at schedule 1(6)(6)(a)(i) of the Individual Savings Account Regulations 1998, I'm even more certain.

    To me that doesn't required the LISA owner to be named on the mortgage.
    Originally posted by cooldude255220
    I see the angle you are taking but in practice I am unsure you will find a lender that would accept a LISA holder buying into a property, with the aid of a mortgage, without being 'on' (ie. agreeing to be bound by the terms of the) the mortgage. How could the lender enforce the terms of the loan to repossess and sell the property if someone with a legal interest in the property has not agreed to be bound by the mortgage terms?

    Alex.
    • cooldude255220
    • By cooldude255220 16th Apr 18, 10:33 PM
    • 1,073 Posts
    • 7,778 Thanks
    cooldude255220
    I see the angle you are taking but in practice I am unsure you will find a lender that would accept a LISA holder buying into a property, with the aid of a mortgage, without being 'on' (ie. agreeing to be bound by the terms of the) the mortgage. How could the lender enforce the terms of the loan to repossess and sell the property if someone with a legal interest in the property has not agreed to be bound by the mortgage terms?

    Alex.
    Originally posted by Alexland
    Yeah, I can appreciate where you're coming from - practically I don't think it's an option, but curiosity got the better of me so I wanted to see if it was theoretically possible.
    2017 MSE Wins: Kitchenaid Mini Stand Mixer | Ridgemonkey Power Pack | Bundle of Yorkshire Crisps | Vax Blade | £200 Meal for 6 at Smokehouse
    2018 Wins: Sky Q for a year | RAINS Jacket and Bag
    • TheBanker
    • By TheBanker 17th Apr 18, 5:57 AM
    • 605 Posts
    • 1,552 Thanks
    TheBanker
    I know it's early days, and no bonuses have been paid yet, but has anyone successfully withdrawn from their LISA towards a house purchase yet?

    I've just made an offer on a house and the seller wants to complete in July. I'm using my LISA balance at completion, not at exchange, so this should work in terms of timescales to make a withdrawal after receiving the bonus in early May (Hargreaves Lansdown suggest it can take a month to process the withdrawal).

    I've spoken to two solicitors, neither of whom seemed very sure about the process. The first one insisted I couldn't use the LISA as my house will cost >£250k (even though I stressed it was a LISA, not a HTB ISA). The second one said they thought it would be ok but they'd look into it. I'm waiting to hear back.

    Anyone else in a similar boat?
    Make £10 a day challenge: Jan-18: £330 / £400
    • pink_pirlie
    • By pink_pirlie 17th Apr 18, 7:01 AM
    • 146 Posts
    • 96 Thanks
    pink_pirlie
    I know it's early days, and no bonuses have been paid yet, but has anyone successfully withdrawn from their LISA towards a house purchase yet?

    Anyone else in a similar boat?
    Originally posted by TheBanker
    We should be getting ours this week / early next week. Our 1 year anniversary is Friday and hoping funds will be released shortly afterwards. Obviously without the bonus - we will have to take a 25% hit on that or leave it until retirement. We werenít expecting to be able to use the product at all as we were due to complete February but delays have meant we can now so thatís a huge bonus in itself.

    Advice - Contact HL ASAP to get the ball rolling.

    They send you a form.
    You return it
    They send forms to your solicitor
    Your solicitor returns them
    HL release the funds - which they say can take up to 30 days (but hopefully quicker)

    All the forms have to go via the post so best to request them in sufficient time.

    Is your money in cash or invested?

    Cash- should be much quicker than 30 days.
    Investments - they have to sell before they can release the funds.

    Just send them a message through your account and they attached the initial form to their reply.

    You also have to give your solicitor a declaration. We used the government sample one as they donít have their own yet. Our conveyancer said this was fine -

    https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/695292/example_of_Investor_model_dec.pdf

    There is a guide for conveyancers too which you could point yours to -
    https://www.gov.uk/guidance/conveyancers-first-time-residential-purchase-with-a-lifetime-isa


    HL have been super helpful for us!!
    They will be getting a mention on praise vent board next week if it all works out okay and we get out money in the next week.
    • Plus
    • By Plus 19th Apr 18, 7:35 AM
    • 332 Posts
    • 263 Thanks
    Plus
    Do we know the dates for bonus payments? For example, someone who paid in on 6th April 2017 and 6th April 2018. I think the date for the 2017/18 bonus is 'early May', so does that mean 6 April money has its bonus paid in 'early June'? Given the 30 day timeline HL describes above, does that mean you in practice can't complete with both bonuses until early July?
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

1,368Posts Today

8,256Users online

Martin's Twitter