The clock is ticking for savers to swap their Help to Buy ISA for a Lifetime ISA and pocket an extra £1,100 in Government bonuses for the 2017/18 tax year.

The Help to Buy ISA has proven popular since it first launched in 2015. The latest official statistics show 143,894 bonuses had been paid to the end of September 2017, supporting over 100,000 first-time property purchases. The total value of these bonuses amounted to £104m.

However, for many the Lifetime ISA will prove a more attractive savings vehicle. Any transfer completed before 6 April 2018 could boost the value of your Lifetime ISA pot without using up your annual £4,000 allowance.

HOW DOES IT WORK?

For this tax year only you can transfer the value of your Help to Buy ISA as it stood on 5 April 2017, and it won’t count towards your Lifetime ISA allowance.

If you’d saved the maximum £4,400 in your Help to Buy ISA by this point and transfer before 6 April 2018, you’ll get an extra £1,100 of bonus money straight into your account by transferring to a Lifetime ISA.

If you also used your entire £4,000 Lifetime ISA allowance on top of the transferred funds, you’d have a total bonus for the year of £2,100.

SHOULD I CONSIDER TRANSFERRING?

There are a number of good reasons to swap your Help to
Buy ISA for a Lifetime ISA.

First of all, your 25% bonus will be credited into your Lifetime ISA account within weeks, whereas the 25% Help to Buy ISA bonus is only added on completion of your property purchase, and so cannot benefit from any investment growth.

The allowances for the Lifetime ISA are also more generous, with savers able to pay in up to £4,000 a year versus £200 a month in a Help to Buy ISA (alongside an initial deposit of up to £1,200).

The amount of bonus you can receive through the Help to Buy ISA is capped at £3,000. With a Lifetime ISA you need to be aged 18-39 to qualify, and can keep contributing and receiving bonuses up until your 50th birthday. That means someone could receive a maximum of £33,000 in Lifetime ISA bonuses over their lifetime.

Finally, the Lifetime ISA allows tax-free withdrawal at age 60, meaning it could act as a handy extra retirement savings pot if buying a first home is no longer your priority.

IMPORTANT POINT REGARDING TRANSFERS

Transferring to a Lifetime ISA won’t be the right option for some people. If you’re going to buy a property in the next year or two, investing in cash is the only way to completely avoid stock market fluctuations.

Help to Buy ISA rates for cash deposits are generally better than the rates currently on offer in the cash Lifetime ISA market.

It’s also worth noting that your Lifetime ISA needs to be open for at least 12 months before you can use the funds to buy a first home.

Finally, if you think you might need your Help to Buy ISA for anything other than a first property purchase or before your 60th birthday, it might be worth staying put.

The Lifetime ISA comes with a 25% Government-imposed early withdrawal charge, meaning you might get back less than you originally invested. The Help to Buy ISA, on the other hand, has no early withdrawal charge.

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