Get a leg-up onto the housing ladder
Transfer your Help to Buy ISA into your Lifetime ISA
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 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 choose to transfer all, or just some, of your Help to Buy ISA into a Lifetime ISA – as long as you don't transfer more than your £4,000 annual LISA allowance during a single tax year. If you've already paid into your LISA this tax year, you can only transfer the amount that remains of your £4,000 allowance.
Money you've paid into your Help to Buy ISA during this tax year has already been counted towards your overall £20,000 ISA allowance. So transferring it to your Lifetime ISA won't use up any more of this allowance.
What you need to consider when transferring your Help to Buy ISA
A Lifetime ISA must be open and funded 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.
You’ll need to fund your Lifetime ISA in the same tax year you open it – otherwise we’ll need to close it. So if you intend to fund your LISA by transferring in, it’ll need to complete before then end of the tax year.
How you’re taxed will depend on your personal circumstances, and keep in mind tax rules and Lifetime ISA rules could change.
Accessing your Lifetime ISA
Once your Help to Buy ISA has transferred to your Lifetime ISA, you’re only 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 government withdrawal charge of 20% (25% from 6 April 2021) will apply – which could mean you get back less than you put in.
Find out more about using your Lifetime ISA to buy your first home.
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.
Case study: Katya and Paul transfer their Help to Buy ISAs to their Lifetime ISAs
In this tax year, Katya has subscribed £1,000 into a Help to Buy ISA, and nothing at all into any other ISAs – leaving her with a remaining annual ISA allowance of £19,000. Interest increases the value of her Help to Buy ISA to £1,050, which she transfers to an AJ Bell Youinvest Lifetime ISA. This counts as a payment into her Lifetime ISA, reducing her remaining annual LISA allowance to £2,950. However, the transfer doesn’t use up any of her overall ISA allowance, which remains at £19,000.
Paul has been saving into his own Lifetime ISA. This tax year, he hasn’t paid into it at all – meaning his remaining LISA allowance is the full £4,000. He also has a Help to Buy ISA worth £6,000, which he also hasn’t paid anything into this tax year. But because his Help to Buy ISA is worth more than £4,000, he won’t be able to transfer the full amount into his Lifetime ISA. He’ll need to make a partial transfer of £4,000, then transfer the remaining £2,000 in the next tax year.
The partial transfer of £4,000 will use up his entire annual LISA allowance, but not affect his overall ISA allowance.
Thinking of transferring a Help to Buy ISA to a Lifetime ISA? Our simple infographic explains everything you need to know.
Transfer your Help to Buy ISA
Before you transfer your Help to Buy ISA, make sure you read the key features document and charges and rates for our Lifetime ISA to make sure the transfer is for you.
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.
Already have a Lifetime ISA with us? Log in to your account and choose transfers.Open a Lifetime ISA