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Got a Help to Buy ISA? It might be better in a LISA

If you're looking to take the first step on the property ladder and a first-time buyer who has never owned a property, the chances are you’ve got a Help to Buy ISA to help you save towards your deposit.

However, there's a deadline approaching. From 6 April 2018 you will only be able to use the bonus from either a Lifetime ISA or a Help to Buy ISA towards your property purchase. So, if intend to use any savings built up in your Help to Buy ISA before 6 April 2017 without it affecting your annual Lifetime ISA allowance, you will need to transfer it before the 5 April 2018.

How can I take advantage of the government bonus if I’ve got a Help to Buy ISA?

Up until 5 April 2018, you can transfer what you've saved in your Help to Buy ISA at its value on 5 April 2017 into a LISA without this amount contributing to the £4,000 annual LISA allowance.

By doing so, the whole amount will benefit from the 25% government bonus, however, any funds you’ve built up on or after the 6 April 2017 will count towards the £4000 annual LISA allowance.

For example: if you opened the Help to Buy in December 2015 and paid in the £200 maximum every month including the £1200 allowable in your first month, you would have a total of £4,400 built up in your ISA by 5 April 2017. Transferring this into a LISA before the 5 April 2018 deadline would mean it wouldn't count towards 2017/2018 tax year annual allowance and you would be eligible for the 25% bonus of £1100.

Is a LISA for me?

Compared to the Help to Buy ISA, LISAs can be the more flexible option. They allow you to save up to £4000 throughout the year, whereas Help to Buy ISAs, except in the first month, will only allow you only to save up to £200 per month.

Bear in mind though, if you're planning on buying in 2018, opening a LISA may not be the best option as you won't be able to use your LISA bonus in the first year from the date you opened the account.

Help to Buy ISA or Lifetime ISA?

Help to Buy ISA

  • You can save up to £200 a month into your Help to Buy ISA including £1200 in your first month.
  • The government will top up any contributions you make by 25%, up to the maximum contribution limit of £12,000. So, for every £200 you save, the government will contribute £50
  • You can use them to buy a home up to the value of £250,000 (£450,000 in London)..
  • They’re only available to open until November 2019, and bonus must be claimed by December 2030.
  • You MUST claim your bonus through your solicitor/conveyancer before completion and usually after exchange on your property purchase. Claims after this date will not be allowed.

Lifetime ISA

  • Flexible saving – you can either add to it monthly or in a lump sum with a £4000 annual limit.
  • You can use it to buy a home up to the value of £450,000 anywhere in the UK.
  • You can use the LISA bonus for the deposit when you exchange contracts.
  • You will not be able to claim your bonus in the first 12 months of you opening your Lifetime ISA account.
  • You need to be between the age of 18 and 40.

If you miss the deadline

You will still be able to transfer any savings from a Help to Buy ISA into a LISA but it will eat into your 2018/19 tax allowance and you won’t benefit from any extra bonus from savings built up in your Help to Buy ISA.

Some providers are already setting deadlines for switching from your Help to Buy ISA to a Lifetime ISA, so it's worth checking with your provider.

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