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Lifetime ISA

The Lifetime ISA vs Help to Buy ISA

Could you buy your first home sooner by transferring to our Lifetime ISA?
Important information - please remember that the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest. If you are unsure of the suitability of your investment please seek advice. Tax rules can change and the value of any benefits depends on individual circumstances. Investing should be considered over the long-term. Money in a Lifetime ISA can be withdrawn to purchase a first home or at age 60. Early withdrawals will usually be subject to a 25% penalty. If you are transferring, please ensure you won't incur excessive exit fees.

Help to Buy ISAs were first introduced in December 2015 to help first-time buyers get onto the property ladder. With the attractive proposition of a 25% top-up from the government on any contributions to use towards a first home, they understandably proved popular.

However, the new Lifetime ISA provides the same attractive government bonus (25%), but also offers other significant benefits compared with the Help to Buy ISA.

Further, transferring a Help to Buy ISA to a Lifetime ISA could mean an additional bonus in this tax year. The bonus will be paid on eligible transfers completed by 5th April 2018 as well as any Lifetime ISA contributions up to the annual limit.

Find out more about transferring a Help to Buy ISA to a Lifetime ISA

Remember, a Lifetime ISA must be opened for at least 12 months before an eligible house purchase can be made.

Below, we highlight the key differences between the accounts, as well as hear from one of our clients who has decided to take advantage and transfer.

It is important to note you cannot invest in the stock market within a Help to Buy ISA, you can only hold your savings in cash, whereas you can invest in the stock market within a Lifetime ISA. If you choose to invest, remember that unlike cash, stock market investments can fall as well as rise in value so investors could get back less than they invest.

Lifetime ISA and Help to Buy – The key differences

 Lifetime ISAHelp to Buy ISA
Who can open the account? 18-39 year olds First-time buyers aged over 16
Can you invest lump sums?YesNo – monthly payments only (£200 maximum per month). an additional payment of £1,000 can be made in the first month
What is the government bonus?Up to £1,000 each tax year until you turn 50*Up to £3,000 in total
When do I receive the government bonus?Annually for 2017/18 tax year and monthly from 2018/19On completion of buying your first home
Can I earn interest on, or invest the government bonus?Yes. You can invest or earn interest on the government bonus as soon as it has been paid in to your Lifetime ISANo. The bonus is paid to your conveyancer when you buy your first home
When can I use the money to buy a house?Anytime, however a withdrawal to purchase a home before the Lifetime ISA has been open for 12 months will result in a 25% government withdrawal charge**After £1,600 has been saved
What’s the maximum property value allowed?£450,000£250,000 (£450,000 in London)
Can I withdraw the money for any reason other than buying my first home?You can withdraw your money tax free after your 60th birthday. From 6 April 2018, withdrawals made before you are 60 which are not for an eligible house purchase will usually incur a 25% government withdrawal charge**You can withdraw your money at any time but won't receive the government bonus on monies you withdraw

*You can also earn a bonus on a single transfer from a Help to Buy ISA to a Lifetime ISA in the 2017/18 tax year.

**This is not applicable to withdrawals in the 2017/18 tax year where the government withdrawal charge will not apply but no bonus will be received.

Transfer to a Lifetime ISA

Help to Buy vs Lifetime ISA - A case study

LISA transfer case study

“Why I transferred my Help to Buy ISA to a Lifetime ISA”

Tom Barnes, a Hargreaves Lansdown employee, explains the key reasons behind his decision to transfer his Help to Buy ISA to our Lifetime ISA.





What do I need to know before I transfer?

  • You can transfer from your Help to Buy ISA as valued at 5 April 2017 (plus any interest on this amount) to the Lifetime ISA in the 2017/18 tax year
  • This first transfer will not count towards your Lifetime ISA allowance and you will receive the 25% government bonus on the value of the transfer at the end of the first year (see example).
  • Any further transfers from a Help to Buy ISA will receive the government bonus and also count towards your Lifetime ISA allowance.
  • If you choose to invest following your transfer, please note that investments don’t offer the same security as cash and can fall in value so you could get back less than you invest.
  • The transfer must complete by 5 April 2018 to qualify. If the transfer completes later than this then the value of the transfer will count towards your Lifetime ISA allowance for the tax year in which it completes.
  • A withdrawal to purchase a home before the Lifetime ISA has been open for 12 months will result in a 25% government withdrawal charge. This is not applicable to withdrawals in the 2017/18 tax year where the government withdrawal charge will not apply but no bonus will be collected.

Transfer your Help to Buy ISA in two easy steps

Please read the Key Features, Terms & Conditions (including tariff of charges) and Important Investment Notes. Before transferring, please ensure you won't incur excessive exit fees.

  1. Download and complete our Lifetime ISA transfer form
  2. Return the form to Freepost HARGREAVES LANSDOWN.

We’ll do the rest and let you know once the transfer completes.

Download your transfer form

Tom has a Help to Buy ISA which is valued at £3,000 on 5 April 2017. He transfers his Help to Buy ISA on 6 April 2017 (2017/18 tax year) and qualifies for the 25% government bonus (£750). Tom can also contribute up to the Lifetime ISA allowance (£4,000) for the 2017/18 tax year and receive the government bonus for this too, resulting in up to £8,750 being paid into his Lifetime ISA in respect of the 2017/18 tax year.