Sammie Ellard-King
I’m Sammie, a money expert and business owner passionate about helping you take control of your wallet. My mission with Up the Gains is to create a safe space to help improve your finances, cut your costs and make you feel good while doing it.
Quickfire Roundup:
There is only one winner here because the Help to Buy ISAs are now closed for new applicants.
There are, however, 1000s of people still with a Help to Buy ISA that can still contribute to their accounts until 2029.
BUT if you’re looking for new account with some added government bonus goodness which could help buy your first home, then the only option is now a Lifetime ISA.
We get it. Saving for a house deposit is hard, and that’s why the government stepped in to help a first time buyer open tax-free savings accounts.
These savings accounts are known as Lifetime ISAs and Help to Buy ISAs. They are both accounts that receive some form of government bonus aimed at getting you on the housing ladder.
The answer of Help to Buy vs Lifetime ISA really should only be an issue for those with a Help to Buy ISA looking at their options or considering opening a Lifetime ISA either alongside or instead.
This is what we’ll unpack in this article, so you leave having all your issues and questions answered.
Open a Lifetime ISA in under 5 minutes with award-winning provider HL.
Table of Contents
Help to Buy vs Lifetime ISA
There are many benefits to holding one of these two types of ISAs. According to Halifax’s data, the average mortgage deposit for first-time buyers in London is currently £115,000.
The average deposit for the UK is £53,935 when writing this in 2023. Theses amounts are for a 15% deposit, but you can put down as low as 5% in some cases.
Even so, this means you’ll likely have to get support from somewhere, which is where Lifetime ISAs or LISAs, as they’re also known, are great products.
Deposits have consistently been on the rise for as long as I can remember, so if you’re planning on buying your first home, then getting started with a government-backed savings account sooner than later is advised.
What is a Help to Buy ISA?
HTB ISAs were set up for over-16s to get them into the housing market. Savers could add up to £12,000 and receive a 25% bonus of £3000 or 25% of anything above £1,600.
Over 340,000 people have benefited from a Help to Buy government bonus since their inception in 2015.Â
Key HTB ISA facts:
- Help to Buy ISAs are now closed to new customers
- If you already own an HTB ISA, you can continue adding to it until 30th November 2029
- You could open with a lump sum of £1000 but only contribute a maximum of £200 per month after this
- Your deposits count towards your ISA allowance of £20,000
- You receive your bonus after your house purchase is complete, and the bonus is not contributed towards a mortgage
- There is no withdrawal penalty, but you would lose your bonus if you withdraw early
Are help to buy ISAs still available?
No, you can no longer open a Help To Buy ISA although they are still active for those who opened them before the deadline.Â
Those with active Help To Buy ISAs can continue to contribute until November 2029 with a further 12 months to arrange the purchase of a property.
What is a Lifetime ISA?
A Lifetime ISA savings pot is part of the individual savings account scheme the government set up to help people save for their first home or retirement savings.
LISA’s can earn you up to £1000 per year in bonuses if you pay in the maximum of £4000 contribution. If you pay under this, then you receive 25% of the value in bonuses.
You can receive compensation of up to £32,000 for the account’s lifetime, but you’d need to contribute the maximum £4k for 32 years.
If you hit that, you’d have a whopping £160,000 saved!
Key LISA facts:
- You can open a Lifetime ISA from the age of 18-39
- Can be used towards your first home or retirement pot
- Your contributions count towards your overall yearly ISA allowance which is tax free
- You can take your money out at the age of 60 if you are saving for retirement
- You can buy your first home after saving for one year
- If you need the money earlier for whatever reason you will incur early withdrawal charges
- The money can be invested in a Shares Lifetime ISA or saved in a Cash Lifetime ISA
- You can pay lump sums and transfer money into a Lifetime ISA from other savings
- It can be used to buy any property style rather than just new builds with help to buy schemes
- Your savings earn interest or returns from investments – interest on some accounts is accused daily but paid monthly
LISA vs Help to Buy ISA Comparison
| Help to Buy ISA | Lifetime ISA | |
|---|---|---|
| Who can hold an account? | Accounts are closed to new applicants but it used to be people over 16 | UK residents aged 18-39. |
| How much can I add each year? | £200 a month so £2,400 a year | £4,000 |
| What's the maximum bonus? | £3,000 | £32,000 |
| What is the maximum property price? | £450,000 in London / £250,000 rest of UK | £450,000 in the UK |
| Is there a charge to withdraw money early? | No, but you will lose your bonus. | Yes, you will lose your bonus plus up to 25% of the money you put in so you'd be left with 75% of your contribution |
| When is the account available until? | 29th November 2029 | There is no closure date |
I've got a Help to Buy ISA what should I do?
Firstly don’t panic and, in fact, congratulate yourself. It’s great that you’ve got a savings account, and even though HTB ISAs have closed to new entrants, you can still contribute until 30th November 2029.
If you’re planning on buying a house before this date, you can continue making payments up to £12,000.
The alternative is to switch your savings over to a LISA and start contributing there. The bonuses are higher, and you’re not required to buy a new build.
Open a Lifetime ISA in under 5 minutes with award-winning provider HL.
Can I have a help to buy ISA and a Lifetime ISA?
Yes, you can have both accounts but it is only possible to receive the ISA bonus for one towards your new home.
You could use your LISA towards retirement and an HTB ISA towards a your first home.
You’d need to weigh the possible bonuses you could get from having a LISA and whether you might be more suited to putting your retirement money into a personal pension or SIPP.
We’ve written about this in our post, SIPP vs ISA.
Should I switch my savings to a Lifetime ISA?
If you want the maximum bonus from the government towards your first property, then yes, but it depends on your finances and how you plan to manage your money.
If you’re thinking about switching to a Lifetime ISA, then speak with some of the top providers to see what benefits you can expect.
- Cash Lifetime ISAs give you the ability to save your money and earn a reasonable interest rate on top of the bonus paid.
- Shares Lifetime ISA options give you access to the stock market, where you can use compound interest, growing your money alongside the total government bonus.
Best Help To Buy ISA Rates
The current best help to buy ISA rates are with the following companies:
HSBC 3.5% (existing customers only)
Lloyds / Halifax – 2.75%
Please note you must already have a Help To Buy open.
How To Transfer Help To Buy ISA To Lifetime ISA?
To transfer a Help to Buy ISA to a Lifetime ISA (LISA), follow these steps:
- Confirm eligibility: Ensure you meet the LISA eligibility criteria.
- Choose a LISA provider: Select a financial institution offering LISAs.
- Open a LISA: Open a LISA with the chosen provider.
- Request transfer: Complete the transfer request form with the LISA provider.
- Provide details: Share your Help to Buy ISA details, and the transfer will be initiated.
Remember that if you transfer £4,000 or more this will contirbute to your ISA allowance and you will only be able to use the bonus from one.
Something to weigh up if you’ve got quite a bit already in your HTB ISA.
Can you have a Help to Buy ISA and a Lifetime ISA?
No, you cannot contribute to both a Help to Buy ISA and a Lifetime ISA (LISA) in the same tax year. However, you can transfer the funds from a Help to Buy ISA to a LISA, retaining the government bonus.
FAQs
Can I transfer help to buy ISA to LISA?
ISA transfer for a Help to Buy ISA is possible. If you want to switch to a Lifetime ISA, this will count toward your yearly limit. As an example, if you transferred £2,000, you can only contribute another £2,000 that tax year.
If you pay in over the £4,000 then it will contribute to your overall ISA allowance of £20,000 (allowed across all ISA types) but you will only receive the bonus for the £4000.
Can I open a joint Lifetime ISA?
No, there is no such thing as a joint ISA, but you can both make use of your own Lifetime ISA allowance and use it on the same property together.
This essentially could give you double the bonus if you’re putting in the same amounts each month.
I'm over 40 does that mean I can't buy with a Lifetime ISA?
Lifetime ISAs close for new entrants at the age of 39, so if you want to open one it needs to be before.
If you’re over 40, your options for government-backed schemes for a first time buyer are limited. In this case, I would look into a Cash ISA to try an maximise higher interest rates.
Lifetime ISA vs Help To Buy ISA - Round-Up
So, in this article, we pit Help to Buy vs Lifetime ISAs. Clearly, as only one account is open, there is only one winner. Lifetime ISA!
Both a Lifetime ISA and a Help to Buy ISA bonus were generated to help first-time buyers.Â
It’s good that the government is providing help for young people to save for a house deposit and finally get on the property ladder.
Maximise your Lifetime ISA limit of £4000 a receive your £1000 maximum government bonus. It is an excellent scheme and doesn’t look like it’s closing anytime soon.
The options for first-time buyers are limited these days, with the Help to buy ISA closing for new applicants and the help to buy equity loan also closing in 2023.
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Disclaimer: Content on this page is for informational purposes and does not constitute financial advice. Always do your own research before making a financially related decision.
