We don’t support this browser anymore.
This means our website may not look and work as you would expect. Read more about browsers and how to update them here.

Skip to main content
  • Register
  • Help
  • Contact us

You’ll need to be quick to cash in on HTB to LISA transfer loophole

  • There are just five months to take advantage of the Help to Buy (HTB) ISA to Lifetime ISA (LISA) transfer loophole, which provides an extra boost for anyone transferring from a HTB ISA to a LISA
  • The government could contribute several hundred pounds more to your property fund if you act fast
  • Savvy investors have started making the most of the loophole. Some 90% of the transfers into an Hargreaves Lansdown LISA are from HTB ISA (not all LISA providers accept H2B transfers)
  • And this handy loophole isn’t the only reason to consider a transfer

Sarah Coles, personal finance analyst, Hargreaves Lansdown:

“If you opened a Help to Buy ISA before the launch of the Lifetime ISA, you can take advantage of special rules and get the government to boost your property fund by hundreds of pounds when you transfer it to a LISA. However, you only have until April 2018 to act, so you’ll need to get your skates on.”

“If you end up with both a HTB ISA and a LISA, you’ll only be able to use the bonus on one of them to spend on your property. You can transfer from a HTB ISA into a LISA after April 2018, but it will eat up your annual LISA allowance, and you’ll miss out on the extra boost from the government, so it’s worth getting in ahead of the deadline.”

Boost your bonus

The special rules for this year mean that the money in your HTB ISA can be transferred into your LISA without making a dent in your annual contribution limit.

It’s worth working through an example to see what this means. Let’s take someone who opened a HTB ISA in December 2015, had put in £4,000 by April 2017, and transferred this to a LISA.

If it was any other year, they would be able to transfer the £4,000, and get a government bonus of £1,000. However, it would use up their entire allowance (so they couldn’t contribute any more or get any more bonus).

This year, however, they can transfer it without using up any of their LISA allowance for this year, so they can contribute another £4,000 by April 2018, and at that point they will get the government bonus of 25% on the entire £8,000 - £2,000.

Sarah Coles, personal finance analyst, Hargreaves Lansdown:

“Even aside from this extra boost, there are seven good reasons why anyone with a Help to Buy ISA ought to consider switching to a Lifetime ISA. You can save more and get a bigger bonus - more quickly. There’s also more flexibility over how you contribute, how your money is invested, what you can spend it on, and what you can hold alongside a LISA. Add to that the fact you can use it for some of your retirement savings as well as a first property, and for anyone who has at least 12 months until they plan to buy, a transfer is well worth considering.”

The seven advantages of a Lifetime ISA over HTB

Both of these vehicles offer a tax-efficient way for first time buyers to save for a property purchase. Both provide a 25% bonus on your contributions from the government. However, the LISA has seven additional advantages:

1. You can get a bigger bonus

HTB allows savers to deposit £1,200 at the outset, followed by monthly payments of up to £200, and then up to £200 a month (so £3,400 a year in the first year and 2,400 thereafter). You only get the government bonus on the first £12,000 you save (including interest) – a maximum of £3,000. By contrast, you can put up to £4,000 a year into a LISA until the age of 50, and get a bonus on all contributions: that’s a maximum investment of £128,000 and a maximum bonus of £32,000.

2. You can invest more flexibly

The £200-a-month limit on HTB must be a regular monthly payment, and cannot be rolled over. The LISA £4,000 can be paid in at any time during the year.

3. You can invest in a wider variety of assets

HTB is just a cash ISA, whereas the LISA allows investment in both cash and stocks and shares.

4. There’s more flexibility over what can be held alongside

HTB is a cash ISA: if you contribute to one in any given year, you cannot also contribute to normal cash ISA. The LISA, meanwhile, can be held alongside a stocks and shares ISA and a cash ISA – as long as you don’t breach the £20,000-a-year limit overall.

5. You can buy a more expensive property

The LISA can be used on properties worth up to £450,000, while HTB is restricted to properties worth less than £250,000 (£450,000 in London).

6. You get your bonus quicker

The LISA bonus is paid monthly (annually in the 2017/2018 tax year), whereas the HTB bonus is only paid when a house is purchased. This gives the bonus the opportunity to grow during the investment period. It also means the money can be used for the house deposit required on exchange – where the HTB bonus is only available on completion.

7. Your plans can change

If you don’t use the LISA to buy a home, you can keep the bonus, keep saving and use it for retirement. If you withdraw it after you hit the age of 60, you won’t pay any penalty, its all tax-free. If you don’t use the HTB for a property purchase, you will not receive the bonus.

Why not?

There are certain people for whom a transfer is either impossible or unwise. This includes people who are too young or too old: HTB is available to any first time buyer over the age of 16. The LISA is restricted to those aged 18-40. It also includes those buying in a hurry, because the LISA must be held for at least a year before the LISA can be used penalty free for house purchase.