If you already have a Help to Buy ISA, you could boost your savings even further by transferring them to a Lifetime ISA (LISA). The Lifetime ISA was introduced by the government in 2017 to help people aged 18-39 buy their first home. While it’s a newer product than the Help to Buy ISA (HTB ISA), which closed to new applications in November 2019, the Lifetime ISA offers many key advantages for first-time buyers. Here are the benefits you could get by transferring, plus how to decide if it’s right for you.
Why transfer a Help to Buy ISA to a Lifetime ISA? 🔄
You could save more, faster
With a Lifetime ISA, you can save up to £4,000 each tax year and get a 25% government bonus on all savings – that’s up to £1,000 for free each tax year! However the annual contribution limit for a Help to Buy ISA is lower: you can only save up to £2,400 each tax year. So, you could earn a bigger bonus much faster by saving with a Lifetime ISA.
You could receive much more in government bonuses over time
If you opened a Lifetime ISA aged 18 and contributed the maximum £4,000 every tax year until you turned 50, you could earn up to £32,000 in government bonuses over time. 💰 With the Help to Buy ISA, the maximum government bonus you can receive overall is capped at £3,000.
You don’t have to save a certain amount to get the bonus
There isn’t a minimum amount you need to save to receive the Lifetime ISA bonus. For every £4 you can save, you’ll get £1 for free and the government bonus is paid into your account each time you save. With the Help to Buy ISA, you need to save a minimum of £1,600 to claim the minimum government bonus of £400. Your bonus isn’t paid directly into your account either – it’s only paid on completion when you buy a home and either you or your solicitor need to apply to claim it. This means you could miss out on receiving interest or gains on your eligible bonus.
You can deposit as much as you like, when you like
The Lifetime ISA allows you to save flexibly, in a way that suits you. You can either deposit a lump sum or make regular payments, as long as you don’t exceed the maximum yearly allowance of £4,000. With the Moneybox Lifetime ISA, you can choose for these to be weekly or monthly deposits, or round up your purchases to the nearest pound and save your spare change into your LISA. However, you can only save a maximum of £200 per month in a Help to Buy ISA, and £12,000 overall, which could slow down your saving if you do have the option to put more money away.
You can choose to save in cash or invest in stocks and shares
With a Lifetime ISA, you have two options: you can either save for your first home in cash with a Cash Lifetime ISA or invest your deposit with a Stocks & Shares Lifetime ISA. Help to Buy ISAs don’t offer the option to invest. Investing over the long term (5 or more years) can offer higher returns than a cash savings account, but it’s important to remember that the value of investments can go up and down, and you may get back less than you invest.
You have more flexibility in the type of property you buy
A Lifetime ISA allows you to buy a property worth up to £450,000, anywhere in the UK. However, with the Help to Buy ISA, the maximum property value is capped at £250,000 (£450,000 in London).
If you want to transfer your Help to Buy ISA to a Moneybox Lifetime ISA, we’ve got you covered. Simply follow the instructions below to get started. Before you do this, please read the Key Features Documents for our Stocks & Shares Lifetime ISA and Cash Lifetime ISA in-app, so you can confidently choose the right product for you. It’s important to note that if you transfer your HTB ISA to a LISA, your funds will count towards the current tax year contributions and also the annual Lifetime ISA limit.
What about the LISA withdrawal penalty?
In some cases, transferring to a Lifetime ISA might not be right for you, so it’s important that you make the right decision for your financial situation. If you transfer a HTB ISA into a LISA, your LISA account will need to be open for at least 12 months before you can use your funds for a home purchase. The clock starts from the date of your first deposit. ⏲️ A withdrawal penalty of 25% will apply if you withdraw your funds before the one year period is up, meaning you’ll lose the government bonus and some of your own contributions. The 25% government charge also applies if you withdraw money from a Lifetime ISA for any reason other than buying your first home (up to £450,000) or for retirement. This means you’ll get back less than you’ve put in.
How to transfer your Help to Buy ISA to a Lifetime ISA ➡️
If you’re transferring in an existing Help to Buy ISA, you’ll need to open your Moneybox Lifetime ISA first, then request a transfer in.
When you go through the registration flow to set up your Lifetime ISA, any one-off or regular payments you set up will be separate from your Help to Buy ISA transfer and will be taken from the Direct Debit. The bank account you connect to your Lifetime ISA should be one that you want to fund the account from. If you don’t want to add money just yet or set up any payments aside from your transfer, you can set all payments to Custom > £0.00.
Once you’ve completed the registration process, you can then request a transfer form in-app by heading to Settings > Transfer > Transfer in. All eligible transfers are now being processed digitally, so you’ll need to return any completed transfer forms either via the in-app chat, or by email to firstname.lastname@example.org. Once we’ve received your completed form, we’ll aim to complete your transfer within 3 weeks.
Please note that we currently aren’t able to accept transfers from the following providers due to their internal systems: Paragon, One Family, Chelsea Building Society, and National Counties. If your provider is listed above, just drop us a message via the in-app chat or email us at email@example.com, and we’ll be in touch once we’re able to resume transfers from your provider.
What else should I know? 💡
- You can choose to save into both a Help to Buy ISA and Lifetime ISA if you meet the eligibility criteria, but you’ll only be able to use the bonus from one product.
- If you use the bonus from a Help to Buy ISA, you’re still eligible for the Lifetime ISA bonus if you use it to save for your retirement.
- Once you’ve transferred a Help to Buy ISA to a Lifetime ISA, it will be subject to all the Lifetime ISA rules.
- If you transfer from a Help to Buy ISA to a Lifetime ISA, it will affect your remaining Lifetime ISA contribution limit, but not your overall ISA limit, as the money was already in an ISA. For example, if you transfer £1,000 from a Help to Buy ISA into a Lifetime ISA, you’ll be able to save a further £3,000 into your Lifetime ISA in that tax year.
A 25% government penalty applies if you withdraw money from a Lifetime ISA for any reason other than buying your first home (up to £450,000) or for retirement. This means you´ll get back less than you´ve put in. Your account also needs to be open for 12 months before you can withdraw penalty-free for a house purchase. It counts as ‘open’ once you’ve made your first contribution.
All investing should be regarded as longer term and you should plan to invest for at least 5 years. It’s important to know that investing involves risk. The value of your investments can go up and down, and you may get back less than you invest.
Tax treatment depends on individual circumstances and is subject to change.