I have a question regarding Help-to-Buy Individual Savings Account (H2B Isa) transfers into Lifetime Isas (Lisas). My 25-year-old son has a H2B Isa with a balance of around £5,000. He also has a Lisa with a £1 balance. He can afford to make a £4,000 deposit into his Lisa before April 2018. Can he transfer his H2B Isa into his Lisa? Would the balance of £9,000 be eligible for the 25% bonus?
Yes, your son can transfer his Help to Buy Isa into his Lifetime Isa. Plus, all the money that he contributed into his H2B Lisa before the Lisa was introduced (6 April 2017) can be transferred without it affecting the £4,000 Lisa allowance. But he must do this BEFORE 5 April 2018.
However, any money that he has contributed into the H2B Isa since 6 April 2017, will use up part of the Lisa allowance when he makes the transfer. So he may not be able to contribute the full £4,000 this year – it will be £4,000 less the amount he has already contributed to his H2B Isa.
Before he makes the decision to transfer the H2B Isa, your son should be aware of a key difference between the two – when you can withdraw the money and receive the bonus.
The Lisa has a larger allowance (£4,000 a year as opposed to £200 a month, as well as the initial £1,000 lump sum) and therefore a larger potential bonus. But if you are looking to buy a property in the short term, the Lisa may not be appropriate. This is because you must have the Lisa account for a minimum of a year before you qualify for the bonus.
On the other hand, you can receive the bonus on the H2B Isa once you have saved £1,600, which could be done in just three months.