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Transfer Help to Buy ISA to LISA (Lifetime ISA)


If you’re looking to start saving to buy a house, you’ve probably been debating ISAs vs Savings Accounts. There are several different types of ISAs, from stocks and shares ISAs to Cash ISAs, all of which are a good option for saving money. But if you already have a Help to Buy ISA, you may want to consider converting it into a Lifetime ISA – fund transfer Help to Buy ISA to LISA could help give a bigger boost to your savings. There are several reasons why this might make sense, for example, while you can save with a Help to Buy ISA and a Lifetime ISA at the same time, you can only use one account to buy your first home, so it could make sense to consolidate!

Transfer help to buy ISA to LISA (Lifetime ISA) – summary table

❓Can I transfer a Help to Buy ISA to a Lifetime ISA?Yes, as long as you don’t go over your 4,000 yearly allowance
🤔 Why transfer a Help to Buy ISA to a Lifetime ISA?There are a number of benefits to switching to a LISA, but most of all you can save more!
🫥 Is there an early withdrawal penalty?Yes, if you withdraw money to buy a house within one year of opening your LISA you will need to pay a fee of 25% of what has been withdrawn

The government created the Lifetime ISA in 2017 to assist anyone between the ages of 18 and 39 in purchasing their first house. The Lifetime ISA is a more recent product than the Help to Buy ISA (HTB ISA), which stopped accepting new applications in November 2019. A Lifetime ISA lets you save more than a Help to Buy ISA (up to £4,000 a year), opening up the possibility for larger government boosts to your savings. LISAs are similar to Self-Invested Personal Pensions (SIPPs), but differ in a few key ways. Since SIPPs are meant to be long-term investments, you cannot access your pension fund before you turn 55. (57 from 2028). Before deciding to invest in a SIPP, you should be aware of this. Except for lifetime ISAs, ISAs let you rapidly access your money.

Can I transfer a Help to Buy ISA to a Lifetime ISA?

Yes! You can transfer Help to Buy ISA to Lifetime ISA as long as you don’t transfer more than your £4,000 yearly ISA allowance in a single tax year. Only the unused portion of your £4,000 limit may be transferred if you have already made contributions to your LISA for this tax year.

Why transfer a Help to Buy ISA to a Lifetime ISA?

There are a lot of reasons why you may want to transfer from Help to Buy to Lifetime ISAs. LISAs are the best ISAs for investing in property, and for why it makes sense to transfer money from a Help to Buy ISA to a LISA. Investing in a Lifetime ISA could assist you in achieving your financial objectives, whether you’re saving for retirement or your first house. Here are five key reasons:

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  1. You can save more: You may save up to £4,000 with a Lifetime ISA and receive a 25% government bonus on all of your savings, which equals up to £1,000 in free money each tax year! A Help to Buy ISA, on the other hand, has a smaller annual contribution cap: you may only save up to £2,400 per tax year. So, by using a Lifetime ISA to save, you might increase your bonus far more quickly.
  2. You can receive higher government bonuses: If you created a Lifetime ISA when you were 18 and made the maximum contribution of £4,000 per tax year until you were 50, you might eventually earn up to £32,000 in government incentives. The total government incentive you are permitted to get with the Help to Buy ISA is capped at £3,000.
  3. You can receive more government bonuses: There is no minimum amount that must be saved in order to qualify for the Lifetime ISA incentive. The government incentive is paid into your account each time you save, and for every £4 you can put aside, you’ll receive £1 for free. To qualify for the minimum government incentive of £400 with the Help to Buy ISA, you must save a minimum of £1,600. Your bonus isn’t deposited into your account either; it’s only paid upon completion of the purchase of a home, and you or your lawyer must submit an application to get it. This implies that you can lose out on interest or earnings from your eligible bonus.
  4. You can pay in as much as you want: With the Lifetime ISA, you can save how you want. As long as you don’t go above the annual maximum of £4,000, you can deposit a flat sum or make recurring installments. However, you are only allowed to save a total of £12,000 in a Help to Buy ISA and a limit of £200 per month, which may cause your savings to lag if you do have the chance to save more.
  5. You have better options for the type of home you purchase: Anywhere in the UK, a Lifetime ISA permits you to purchase a home up to £450,000. The Help to Buy ISA, however, has a £250,000 ($450,000 in London) maximum property value cap.

What about the LISA withdrawal penalty?

It’s crucial that you choose the course of action that is best for your financial position because when you transfer Help to Buy to Lifetime ISAs, it might not always be the best option for you. Before you can use the funds from the transfer HTB ISA to LISA for a property purchase, your LISA account must have been open for at least 12 months. The timer begins on the day that you made your initial contribution. Withdrawing money from your ISA without appropriate approvals on or after April 6, 2021, will be subject to a 25 percent withdrawal charge. If you take your money out before the year is up, a 25% withdrawal penalty will be charged, and you will lose both the government bonus and some of your own contributions. If you withdraw money from a Lifetime ISA for any purpose other than purchasing your first property (up to £450,000) or for retirement, a 25% government fee will also be assessed. This implies that you will receive less than what you invested.

How to transfer your Help to Buy ISA to a Lifetime ISA

Before you combine ISA transfers, you will first need to set up a Lifetime ISA with Moneyfarm. Once you’ve set up a Lifetime ISA, you can transfer your ISA money to your LISA, connect with a financial adviser to start setting up payments.

Frequently Asked Questions

Who can open a Lifetime ISA?
Anyone between the ages of 18-39 year olds can open a Lifetime ISA

When can I take money out of a LISA to buy a house?
You can take out money from your LISA to buy a house anytime after having the account open for one year, otherwise there’s a 25% charge, so you could get back less than you put in.

Is there a maximum house price allowed?
The maximum house price for a Lifetime ISA is £450,000.

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