Help to Buy ISA vs Lifetime ISA - can you transfer?

October, 2022

If you are a first-time buyer and you have a help to buy ISA, understanding the difference between the two and knowing whether to transfer or not.

Both Help to Buy and lifetime ISAs give you a 25% bonus on your savings when you use them to buy your first home – but there are some important differences between the two.

Help to Buy ISA

The Help to Buy ISA is only open to new applicants until the 31st October 2022 and you can still put in up to £200 each month until November 2029.

You can save up to £12,000 in a Help to Buy ISA and get a 25% government bonus (up to £3,000) when you use the money to buy your first home. This bonus is paid when the house purchase has completed, which means you can't use the bonus for your deposit.

The property must be worth £250,000 or less if it's outside London, or up to £450,000 in London for you to get the 25% bonus.

You have to claim the government bonus by December 2030.

Lifetime ISA

You can still open a lifetime ISA if you're a UK resident aged between 18 and 39. You can pay into the account until you reach the age of 50.

With a lifetime ISA, you can save up to £4,000 each year and the government will add 25% of however much you put in (up to £1,000 a year). The bonus is applied monthly - find out how much you could earn with our free lifetime ISA calculator.

You have to use your lifetime ISA to buy your first home or to pay for your retirement at the age of 60. If you take your investments out for any other reason, you'll have to pay a 25% charge.

Unlike the Help to Buy ISA, you can use the bonus for your house deposit for a property worth £450,000 or less regardless of where it is in the UK.

It must be the first property you've bought and the lifetime ISA has to have been open for a year before you can use it.

You can't receive the government bonus on both

While you can have both a lifetime ISA and a Help to Buy ISA, you can only receive a government bonus on one of them.

What to consider before transferring your savings from a Help to Buy ISA into a lifetime ISA

The price of the property.

If you're planning on buying a property worth more than £250,000 (outside of London) then you'll only be able to get the government bonus on a lifetime ISA. If you're buying in London, the limit on both is £450,000.

How much you want to save and how quickly.

Lifetime ISAs allow you to save up to £4,000 a year with no overall limit - but you can't pay any money in after you reach 50. With Help to Buy ISAs, you can save up to £12,000 in total over any time period. Bear in mind that you need to save at least £1,600 in your Help to Buy ISA to get the government bonus.

When you want to buy.

You'll only get the bonus on a lifetime ISA if you keep your money invested for at least a year.

Whether you want to use the government bonus towards your deposit or not.

With a Help to Buy ISA, you won't get the bonus until after you complete your house purchase, but with a lifetime ISA the bonus is added to your account each month you pay money in.

Your age.

You have to be under 40 to open a lifetime ISA and you won't be able to pay any money in after your reach 50.

How much risk you want to take with your money.

Help to Buy ISAs are cash ISAs, meaning the money grows by earning interest like a current account. Lifetime ISAs, on the other hand, are available as either cash ISAs or stocks and shares ISAs. If you move your money from a Help to Buy ISA into a stocks and shares lifetime ISA, your savings will be invested in the stock market and while this could mean you end up with more money, there is also a risk the value could go down.

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