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Help to Buy ISA accounts can no longer be opened as the scheme closed in November 2019. Lifetime ISAs were launched in 2017 and provide similar perks to their Help to Buy counterparts but it is possible to transfer funds across.
Many people will likely need to do this as while it is still possible to hold and save into a Help to Buy ISA, this can only occur up until November 30 2029.
Beyond that, Help to Buy ISA holders will only have until December 1 2030 to claim their bonus.
Transferring funds from a Help to Buy ISA to a Lifetime ISA should be a simple process but a certain amount of planning will be needed.
This is because any trader into a Lifetime ISA will count towards its £4,000 annual limit.
Those with large Help to Buy accounts will likely need to transfer their funds in tranches if they’re above this threshold.
Additionally, savers will need to check that the bank, building society or credit union they’re looking to move into accepts transfers of this nature.
Lifetime ISAs and Help to Buy ISAs can be held at the same time but a bonus can only be received from one of them when buying a house.
Both accounts can provide a tax free bonus for a home purchase but there can be drastic differences in what can be awarded.
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Help to Buy ISAs can have a maximum of £2,400 saved into them in a year while Lifetime ISAs can have a maximum of £4,000.
The maximum bonus that can be paid out with a Help to Buy ISA is £3,000.
However, the most that can be paid out with a Lifetime ISA, assuming it is used to its utmost potential, is £32,000.
If a saver is unable to receive the highest bonuses on offer for either account, they’ll still be able to receive a 25 percent bonus on whatever they have managed to save.
Lifetime ISAs however can provide a perk that the Help to Buy ISA cannot.
While the bonus paid out will likely be used for a home purchase, it should be noted that Lifetime ISA holders can use the tax free bonus to fund retirement if they don’t want to use it for a house.
From the age of 60, Lifetime ISA holders can withdraw the funds and bonuses from the account with no limitations.
This cannot be done with Help to Buy ISAs which only have a bonus paid when the account is used for buying a home.
Lifetime ISA withdrawals that are not made for a home purchase or to fund retirement will face a charge which will reduce how much bonus income can be received.
Usually, this charge is 25 percent but the government recently reduced it to 20 percent in response to the coronavirus pandemic.
It will go back up to 25 percent on April 6 2021.
Anyone can open a Lifetime ISA so long as they are:
- Aged between 18 and 40
- A resident in the UK or
- A Crown Servant or are the spouse or civil partner of a Crown Servant
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