Moving a Help to Buy ISA into a Lifetime ISA

You can move a Help to Buy ISA into a Lifetime ISA. The option exists for anyone still holding the older account, and it lets you keep the government bonus while moving your savings into a product that allows more to be paid in each year¹.

The transfer counts towards the £4,000 Lifetime ISA limit for the tax year, not your overall £20,000 ISA allowance, because the money has already been counted once². The government adds 25% on what you move, up to £1,000³. You can transfer all, or just some, of your Help to Buy ISA².

The Help to Buy ISA itself closed to new savers on 30 November 2019, but existing holders can keep saving into one until 30 November 2029⁴. A new first time buyer product has been proposed to replace the Lifetime ISA, and until it becomes available it remains possible to open a Lifetime ISA and keep saving into one under the existing rules⁵.

You can move a Help to Buy ISA into a Lifetime ISA

The Help to Buy ISA was the earlier of the two government-backed first home savings products, and it has been replaced by the Lifetime ISA⁸. If you still hold one, transferring it into a Lifetime ISA is one of your options, alongside leaving it where it is or moving it to another Help to Buy ISA provider¹.

You can hold both a Help to Buy ISA and a Lifetime ISA at the same time¹. You can also pay into both types of account during the same tax year, but you will only get the government bonus on one of them when you buy your first home¹. That rule is set in legislation: an account investor must declare they are not also claiming a bonus under a Help to Buy ISA, or has repaid any such bonus in full first⁹.

The transfer itself is a normal ISA transfer, so the usual rules apply. The normal transfer rules for ISAs allow savers with Help to Buy ISAs to move between providers¹⁰. Existing holders have been able to transfer to a different provider since 30 November 2019¹¹.

A partial transfer is possible. You can transfer all, or just some, of your Help to Buy ISA into a Lifetime ISA². That matters if your balance is larger than the £4,000 annual Lifetime ISA limit, because you can move it across over more than one tax year.

Help to Buy ISA and Lifetime ISA compared

The two accounts share the same headline bonus rate but differ in how much you can pay in, when the bonus is paid and how the money can be used.

The Lifetime ISA allows more money to be put in, a bigger bonus, and withdrawal at the point of exchange rather than after completion¹⁸. The Help to Buy ISA bonus applies to both the amount a person saves and the interest built up while the account is open¹⁰.

Both can be used towards a first home deposit. You can use a Help to Buy ISA or Lifetime ISA towards your deposit under the First Homes Fund in Scotland¹⁹. If you have a Help to Buy ISA or Lifetime ISA, you can use it to pay a deposit for a home through Right to Shared Ownership or Rent to Buy²⁰.

The Lifetime ISA is not only for homes. Until you hit 50, you can add up to £4,000 a year, and the account can be used for retirement as well as a first home²¹. Contributions and the government bonus stop at age 50⁷.

Government bonus: 25% on what you transfer

The government adds 25% to what you move across. You will get a 25% government bonus on the amount you transfer, up to £1,000³. That cap follows from the £4,000 annual limit: there will be a £4,000 limit on the annual amount that an account holder can pay into their Lifetime ISA, making the bonus a maximum of £1,000 each year¹⁵.

The bonus is not paid twice on the same savings. If you hold both a Lifetime ISA and a Help to Buy ISA, you can only use the government bonus accrued from one of them to buy your first home²². Savers will be able to save into both a Help to Buy ISA and a Lifetime ISA, but will only be able to use the government bonus from one of them¹⁰.

There is a special case in the rules for the 2017-18 tax year. During that year only, those who already had a Help to Buy ISA could transfer any funds, including the balance built up before 6 April 2017, without counting towards the Lifetime ISA contribution limit, and receive the government bonus on the full value transferred⁷. That window has closed, so transfers now follow the standard £4,000 limit.

If you are buying with someone else who also has a Lifetime ISA, you can both use your savings and government bonus, provided you are both first-time buyers and meet all the conditions²³. Saving separately in two Lifetime ISAs can double the government bonus a couple can receive²⁴.

Transfers count towards the £4,000 Lifetime ISA allowance

This is the rule that catches most people out. You can transfer money from a Help to Buy ISA to a Lifetime ISA, but this will count towards the £4,000 Lifetime ISA allowance for that tax year, not your overall ISA allowance²². The value transferred counts against the £4,000 Lifetime ISA limit but not the overall ISA limit for the year⁷.

The £4,000 limit is separate from, and sits inside, the £20,000 overall ISA allowance. Any contributions to a Lifetime ISA sit within the overall £20,000 ISA contribution limit²⁶. The £4,000 usually counts towards your overall £20,000 ISA annual allowance²⁷.

Because the money in your Help to Buy ISA has already used part of your £20,000 allowance in the year you paid it in, moving it does not use up any more of that allowance. The money you have paid into your Help to Buy ISA during this tax year already counts towards your overall £20,000 ISA allowance, so transferring it to your Lifetime ISA will not use up any more of this allowance². Transferring an ISA does not use up your ISA allowance²⁸.

The £4,000 limit applies to transfers from other types of ISA as well. You can transfer money from another type of ISA to a Lifetime ISA up to the £4,000 per year limit²⁸. You can normally transfer up to £4,000 from another non-Lifetime ISA to a Lifetime ISA³. If you transfer a stocks and shares or cash ISA into a Lifetime ISA, it will count towards your Lifetime ISA payment limit²⁹.

You can split your ISA allowance across multiple banks or providers, with no more than one Lifetime ISA, Innovative Finance ISA or Help to Buy ISA, and total saving not exceeding the allowance³⁰.

What happens if my Help to Buy ISA balance is more than £4,000

A balance above £4,000 cannot all move into a Lifetime ISA in a single tax year, because transfers count towards the £4,000 annual limit²². Your options are to move up to the limit each year, to leave the rest in the Help to Buy ISA, or to use the Help to Buy ISA for the home purchase instead.

Leaving money in the Help to Buy ISA is possible because the account stays open to contributions. The scheme was closed to new accounts on 30 November 2019, though Help to Buy ISA account holders can continue saving into it until 30 November 2029⁴. The Help to Buy ISA has closed to new savers, but you can add money to one you have already opened until 30 November 2029³¹.

The Help to Buy ISA bonus has its own cap. HSBC, for example, states a maximum bonus of £3,000 if your closing balance is £12,000 or more¹⁴. The bonus applies to both the amount saved and the interest built up during the period the account is open¹⁰.

If you decide to close a Help to Buy ISA rather than transfer it, providers set their own conditions. To close a Help to Buy ISA with Bank of Scotland, you need to have a balance of £15,000 or less and a current account within the same brand to transfer funds to³².

How to arrange the transfer

The transfer is arranged between the two providers, not by withdrawing the money yourself. Withdrawing and reinvesting would break the ISA wrapper and could cost you the bonus, so the transfer is done provider to provider.

1. Check your Lifetime ISA provider accepts transfers in from a Help to Buy ISA, and ask what it needs from you.
2. Decide whether to move all or part of the balance, bearing in mind the £4,000 annual Lifetime ISA limit².
3. Complete the transfer request with the receiving provider, giving details of your Help to Buy ISA.
4. The providers move the money between them. An account must be transferred within 30 days of an account holder's request⁷.
5. Check the bonus is added. You will get a 25% government bonus on the amount you transfer, up to £1,000³.

Individuals will be able to transfer their Lifetime ISA within 30 days between providers, in line with the normal ISA transfer rules²⁶. An account must be transferred within 30 days of an account holder's request³⁴. If you are moving from one Help to Buy ISA to another provider rather than to a Lifetime ISA, you need to transfer the entire balance, and you can only have one Help to Buy ISA³⁵.

There is a cancellation right on some Lifetime ISA contracts. A non-distance contract to open or transfer a Lifetime ISA, following a personal recommendation or ready-made suggestion, carries a 30 calendar day cancellation period³⁴.

If something goes wrong

If a transfer is delayed or a charge is applied unexpectedly, the provider's complaints process comes first, and then the Financial Ombudsman Service. The ombudsman has published a case study about an unexpected withdrawal charge when transferring money between different ISA types, involving a customer who transferred an existing Help to Buy ISA into a Lifetime ISA and was told they would receive the government bonus on the full amount transferred³⁶.

The withdrawal charge is the main risk to understand. It recovers any government bonus and any investment growth on that bonus, plus an additional amount³³. That means a Lifetime ISA is designed to be used for a first home or after age 60, and taking money out for anything else costs more than you put in if a bonus has been paid.

If you are buying with someone else, remember that only one bonus can be used per person. If the person you are buying with has a Lifetime ISA, you can both use your savings and government bonus, provided you both meet the conditions²³. Where current year payments are made to more than one Lifetime ISA, only one account will be a valid account eligible for payment of a government bonus³⁷.

A government bonus accrued on payments made into a Lifetime ISA on or before the date the investor died can still be claimed³⁸. That is a separate process from a transfer, and the provider managing the account will explain what is needed.

For free, impartial help with savings and ISA questions, MoneyHelper is the government-backed service. For debt problems, StepChange and other debt advice charities offer free advice.