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 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 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.
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 25% government withdrawal charge 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.
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.
You won't be able to open a LISA if you're 40 or older, unless you’re transferring in an existing LISA from another provider. At the moment, if you're 40 or over, you can't do this with AJ Bell Youinvest, but you'll be able to later in 2018.
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.
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.
You can use your AJ Bell Youinvest Lifetime ISA, including the government bonus, to buy your first home. There are some conditions though.
You’ll need to:
- Be a first-time buyer (i.e. you’ve never owned a home anywhere in the UK or the rest of the world – this includes any home you’ve inherited, or owned with someone else)
- Have had your Lifetime ISA open for 12 months
The property must be:
- In the UK
- Cost less than £450,000 (even if you are buying with someone else)
- The only home you’ll own, and be where you intend to live
- Purchased with a mortgage
To buy your first home with your Lifetime ISA, you’ll need to contact your solicitor/conveyancer directly, who’ll ask you to complete a declaration. They’ll then complete their own declaration, which they’ll send to us.
Your Lifetime ISA money will be sent directly to your solicitor/conveyancer to be used for your house purchase. You can't use it for any additional costs such as solicitor fees or furniture and fittings.
You'll need to make sure you have the cash available in your Lifetime ISA when your solicitor/conveyancer sends us the request.