Lifetime ISA: What is the difference between a Help to Buy ISA and a LISA? | Personal Finance | Finance


There are a number of savings accounts available to help you save for your first home. Two popular ISA’s for first-time buyers are the Lifetime ISA (LISA) and the Help to Buy ISA. It’s important to note though you are no longer able to open a new Help to Buy ISA, however, if you have one already you can continue saving into it.

What is a Help to Buy ISA?

With a Help to Buy ISA, for every £200 you save the Government will top it up by £50.

The Help to Buy ISA gives you a Government bonus of 25 percent (capped at £3,000) on anything you save above £1,600.

The Help to Buy ISA closed to new accounts at midnight on November 30, 2019.

But people who already have a Help to Buy ISA can continue to save into it until November 2029.

READ MORE: Help to Buy ISA vs Lifetime ISA – the differences which impact goals

Steve Watson, head of proposition at Cushon, told “With interest rates an all-time low, there is no need to shop around, with the Government 25 percent top-up, a LISA blows any interest rate out the water.

”If someone is saving for a deposit for a first home in a normal savings account, they are missing out on a massive boost.

“For example, if they have £4,000 saved in a savings account, if they open up a LISA before the end of the tax year and transfer their cash they will immediately get a £1,000 bonus.

“First time buyers just need to bear in mind that the LISA needs to be open for at least 12 months before it can be used.”

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What’s the difference between a Help to Buy ISA and a LISA?

With a Help to Buy ISA you can only save £200 per month (£2,400 per year), but a Lifetime ISA allows you to contribute more annually.

Matt Dean, managing partner at Hoxton Capital Management, told “Help to Buy ISAs are not available for new investors however if you opened a Help to Buy ISA before November 2019 you can continue to save in them until 2029.

“If you do place money into a Help to Buy ISA the government will boost your savings by 25 percent, up to a maximum of £3,000.

“Lifetime ISAs are still available to invest in and are a better way of saving than a Help to Buy ISA as you are able to invest a maximum of £4,000 each tax year and the Government will give you a 25 percent bonus on all contributions with no limit.

“This means that you can save up to £5,000 (including bonus) each tax year.

“The house purchase price is a maximum of £450,000. You are also able to invest your Lifetime ISA into Stocks & Shares if you chose to potentially increase your growth within them.”

You can remove money from your Help to Buy ISA account, but you will lose your Government bonus on the amount.

With a Lifetime ISA, you will pay a withdrawal charge if you take out cash for any other reason than is authorised.

The withdrawal charge is currently 20 percent, but from April 6, 2021 it will be 25 percent again – which covers the Government bonus you receive on your savings.

The Money Advice Service also explain how you get your bonuses differs between a Help to Buy ISA and a LISA.

Their website states: “The Lifetime ISA’s bonus is paid monthly so can be used towards any deposit requirements on exchange of contracts (England, Wales and Northern Ireland).

“The bonus on the Help to Buy ISA however needs to be claimed between exchange and completion.

“This means any bonus will contribute towards your overall or mortgage deposit and therefore can’t be used at exchange.”


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