Using a Help to Buy ISA to get onto the housing ladder? You could give yourself a helping hand by transferring it into a Lifetime ISA.
There are several reasons why this might make sense. For one thing, although you can save into a Help to Buy ISA and a Lifetime ISA at the same time, you can only use one account to buy your first home. So it can pay to consolidate.
For another thing, a Lifetime ISA lets you save more than a Help to Buy ISA (up to £4,000 a year). That opens up the possibility of a larger government boost to your savings. And while all Help to Buy ISAs are cash only, an AJ Bell Youinvest Lifetime ISA lets you invest – and potentially make your money work even harder.
What you get with an AJ Bell Youinvest Lifetime ISA:
- A government bonus of 25%
- Great investment ideas including AJ Bell Passive funds and our favourite funds list
- A wide range of investment choices, including funds and shares
- Low dealing and custody charges
- Manage your Lifetime ISA online and with our mobile app
You can transfer your Help to Buy ISA into a Lifetime ISA either in whole or in part. And if you transfer this tax year, you could potentially earn a larger government bonus. Here’s how it works.
For the 2017/18 tax year only you can transfer the value of your Help to Buy ISA as it stood on 5 April 2017 as a single transfer, and it won’t count towards your 2017/18 Lifetime ISA allowance. This money will also qualify for the government bonus.
If you transfer more than the 5 April 2017 value of your Help to Buy ISA (such as payments you've made on or after 6 April 2017), or make any subsequent transfers, this excess amount will count towards your annual £4,000 Lifetime ISA allowance.
What you need to consider when transferring your Help to Buy ISA
- A Lifetime ISA must be open for 12 months before you can use it to buy your first home
- The AJ Bell Youinvest Lifetime ISA has been designed for investing in shares and funds. Investments don’t offer the same security as cash and can fall in value – meaning you could get back less than you invest
- You can only open a Lifetime ISA if you are aged between 18 and 39
- Unlike a Help to Buy ISA where you can withdraw some or all of your cash at any time, there are restrictions on withdrawing cash from a Lifetime ISA. Read more on accessing your Lifetime ISA below.
Accessing your Lifetime ISA
- Once your Help to Buy ISA has transferred to your Lifetime ISA, from 6 April 2018 you will be able to withdraw money free of charge if you’re buying your first home, if you’re over 60 or if you’re terminally ill. If you withdraw under any other circumstances, a 25% government withdrawal charge will apply – which could mean you get back less than you put in
- You can withdraw the money from your Lifetime ISA this tax year without paying the government withdrawal charge. But it will mean your Lifetime ISA will be closed
A Lifetime ISA can also be used to save for later in life. If you choose to save in a Lifetime ISA instead of enrolling, or contributing to your workplace pension scheme, you will miss out on the benefit of your employer’s contributions to that scheme and your current and future entitlement to means tested benefits may be affected.
Transfer your Help to Buy ISA
When you’re ready to transfer, the process is easy. Just open a Lifetime ISA with us, and during the application process, we’ll ask for the details of the Help to Buy ISA you want to transfer.Open a Lifetime ISA Already have a Lifetime ISA with us? Log in to your account and choose transfers.
Frequently asked questions
To open a Lifetime ISA (LISA), you need to be aged at least 18 and under 40. Having opened a LISA account, you can keep paying in until the day before your 50th birthday.
If you’re 40 or older, you can’t open a LISA – unless you’re transferring in an existing LISA from another provider. You’ll be able to do this when transfers to AJ Bell Youinvest Lifetime ISAs are available later in 2017.
LISAs can only be opened by individuals. And you must ordinarily be a resident of the UK, a Crown employee working overseas, or a spouse or dependant of a Crown employee.
You can pay in up to £4,000 per year into your Lifetime ISA until the day before your 50th birthday. But be careful not to exceed the overall annual ISA subscription limit of £20,000, which a payment into a LISA normally counts towards.
Yes, you can open a Lifetime ISA alongside any other ISAs you may hold (cash, stocks and shares, help to buy or innovative finance). But be careful not to exceed the overall annual ISA subscription limit of £20,000, which a LISA normally counts towards.
You can also open more than one Lifetime ISA, but you can only pay in to one each tax year.
You can withdraw money from your Lifetime ISA (LISA) to fund the purchase of your first home, as long as it’s worth £450,000 or less, and you’re buying with a mortgage.
You can also withdraw money from your Lifetime ISA when you’re 60 or older. If you withdraw cash from your LISA for any other reason, except in the case of terminal illness, you’ll have to pay a 25% government withdrawal charge. This means that for every £100 you withdraw (the £80 you put in plus the £20 bonus), £25 would be deducted and you’d only get back £75 – less than the £80 you put in.
Special rules apply to withdrawals made in the 2017/18 tax year. It is possible to withdraw all the funds from your Lifetime ISA - this means your Lifetime ISA will be closed. As you will not have received the government bonus you won’t have to pay the government withdrawal charge. However, you are not able to withdraw part of the monies from your Lifetime ISA in the current tax year.
The government bonus is calculated at 25% of your payments in. So if you pay £80 into your Lifetime ISA, your government bonus will be £20. The bonus is paid directly into your Lifetime ISA, and is arranged by us automatically.