Saving to buy your first home can be tricky, but here’s a quick tip to increase your savings along the way.
If you have a Help to Buy ISA, you have just a few months to take advantage of the loophole which could boost your savings by as much as £1,100.
Transferring your Help to Buy ISA to a new Lifetime ISA (LISA) before the 5th of April 2018, could give your house deposit savings an extra 25% top-up from the government!
What you need to know
- In order to qualify, you need to have opened your Help to Buy ISA before the 5th of April 2017 (before the LISA was launched).
- Your April 2017 balance will be topped up by 25% after transferring to a LISA, without affecting your £4,000 annual LISA allowance!
- Any monies paid into your Help to Buy ISA since April 2017 will count towards your annual LISA allowance.
- If you don’t transfer your Help to Buy ISA to a LISA before the 5th of April 2018, you’ll miss out!
Here’s an example of how you’ll benefit
Let’s say your Help to Buy ISA is now worth £6,400 (January 2018) and your balance in April 2017 was £4,400*. It is your April 2017 balance that receives the extra 25% top-up from the government.
= transferring to the LISA will get you £1,100 of free money!
*£4,400 is the maximum anyone could’ve held in a Help to Buy ISA as at April 2017
As you’d of only paid in £2,000 (inc. 25% monthly bonuses) this tax year to the Help to Buy ISA, this still leaves you a further £2,000 to use up of your new £4,000 LISA allowance before April 2018. That’s potentially a further £500 for free.
= £2,000 total free money during 2017/18 tax year
- If you’re not 100% sure that you’ll use this money for buying your first home then the LISA might not be for you. It carries a penalty of 6.25% if you cash it in for anything other than your first home (or retirement), whereas the help to Buy ISA has zero penalties.
- Keep in mind, LISA’s cannot be accessed within 12 months of opening an account.
If you think the LISA is right for you, discover how many extra savings you could receive!