• Katy Stephenson

Can You Transfer a Help To Buy ISA Into a Lifetime ISA?

If you're saving for a mortgage, something you absolutely must do is set up a Lifetime ISA. It shouldn't be up for discussion, just do it! But what if you've already got a Help To Buy ISA you're paying into? Is it worth transferring your savings across into a Lifetime ISA?

Help To Buy ISA

  • Save up to £200 each month and in your first month, you can deposit up to £1,200.

  • Government bonus = 25%

  • Maximum government bonus = £3,000

  • Need to have at least £1,600 before you can claim the government bonus.

  • When buying your first home, your solicitor will claim your bonus for you once your offer has been accepted.

  • House property price threshold = £250,000 outside of London, £450,000 in London

  • If you're planning on buying a property with someone else, you can both take advantage of separate Help To Buy ISAs.

  • Closed to new accounts from November 2019 but if you already had one, you can continue saving into it until November 2029.

Lifetime ISA

  • You can open a Lifetime ISA if you are between the ages of 18 and 40 and a UK resident and continue to pay into it until you are 50.

  • You can only withdraw money if you’re buying your first home which you plan to live in; aged 60 or over or terminally ill with less than 12 months to live. If you withdraw money for another reason, you'll be charged for it (usually 25% of the amount withdrawn).

  • Save up to £4,000 each tax year

  • Government bonus = 25%

  • Maximum government bonus = £33,000

  • Bonus paid into your account monthly based on the months starting on the 6th and ending on the 5th of the following month.

  • House property price threshold = £450,000

  • If you're planning on buying a property with someone else, you can both take advantage of separate Lifetime ISAs.

Should you switch?

Yep, I would! I think it's clear to see that the Lifetime ISA seems like such a better option and I wish I'd switched before we bought our house as it definitely would've saved me a lot of money!

Unfortunately, when we bought our house, even though our share was under the £250,000 limit of the Help To Buy ISA, because the total price was over the threshold, I wasn't entitled to the bonus. As you can imagine, this meant I was scrambling around trying to scrape together money that I had factored into our budget and although I got there eventually, I wouldn't wish that panic on my worst enemy. This is the main reason why I'd switch to a Lifetime ISA just so you have one less thing to worry about!

If you are planning on switching then you need to remember that you must be paying into a Lifetime ISA for a minimum of 12 months before you can claim the bonus. And if you're thinking "ooh, can't I have both?" unfortunately not! Well you can, but you can only claim the government bonus on one of them!

How do you switch?

Once you've set up your snazzy new Lifetime ISA, you can choose to transfer all or just some of your Help To Buy ISA into it, as long as you don’t transfer more than the annual allowance (£4,000) in a single tax year. And if you've already deposited into your Lifetime ISA, then it's just £4,000 minus that amount which is your limit.

I hope you've found this useful if you've been umming and ahhing about transferring from a Help to Buy ISA to a Lifetime ISA. If I could go back in time, I definitely would've switched!

Have you got a Help To Buy ISA or Lifetime ISA?

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