Savers urged to cash in on Help to Buy Isa transfer loophole

1 February 2018

Help to Buy Isa customers who wish to transfer their cash into a Lifetime Isa (Lisa) have one month left to ensure their transfer goes ahead in this tax year and they maximise their government bonus.

The Lifetime Isa launched in April 2017 and lets account holders save £4,000 each year towards the cost of buying a home, compared to £2,400 in a Help to Buy Isa (£3,400 in the first year). Savers receive a 25% bonus from government on the amount they saved in either of the products.

While there is only one provider of the cash Lifetime Isa currently on the market – Skipton Building Society, paying 0.75% - the higher annual allowance means for most people they will be better off with a Lifetime Isa.

However, those wanting to transfer a Help to Buy Isa which was opened before April 2017 should act now as a transfer loophole means they can receive an extra bonus for this tax year only.

Any cash you held in your Help to Buy Isa before 5 April 2017, including interest earned on that cash, can be transferred over to a Lifetime Isa without it counting towards the yearly £4,000 Lisa allowance.

This means you can earn a 25% bonus on this cash, and still have your annual £4,000 allowance available. However, any contributions paid into your Help to Buy Isa in the 2017/18 tax year will count towards this year’s Lisa limit.

With only one cash provider on the market, Skipton Building Society has set customers a 1 March deadline to submit their applications to ensure that all switches can be processed in this tax year.

Of the providers offering a stocks and shares version of the Lifetime Isa, The Share Centre has set a deadline to transfer - 29 March 2018. Others, such as AJ Bell and Hargreaves Lansdown, do not have any deadline. This means you can still receive the extra bonus as long as you transfer by 5 April 2018.

However, once the tax year ends you will not be able to transfer without it affecting your annual Lifetime Isa allowance.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, says: “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.”

“You can transfer from a Help to Buy Isa into a Lifetime Isa 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.”

Read the Moneywise guide to find out whether it’s right for you to switch your Help to Buy Isa to a Lifetime Isa.

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