Lifetime ISA vs Help to Buy ISA

POSTED ON Monday, 11 January, 2021

We look at the differences between lifetime s and Help to buy s in 2021.

The Help To Buy ISA and the Lifetime ISA can both be used to save towards the costs of purchasing a new home.

What do these products offer, and how do they differ?

Help To Buy ISA
Lifetime ISA
Who can open one?
It is no longer possible to open a new Help To Buy ISA.

UK residents aged between 18 and 39.
Who can make contributions?
Any existing account holder – the contributions deadline is November 2029.

UK residents up until their 50th birthday.
Who are they intended for?
Only for prospective first-time buyers.For prospective first-time buyers and/or younger people wishing to save towards retirement.   

How much can I contribute?
Up to £1,200 per month in the first month and up to £200 per month thereafter.   

Up to £4,000 per tax year, as a lump sum and/or regular contributions.
How does the Government bonus work?Once you have contributed £1,600, the Government will boost your savings by 25%. The maximum Government bonus is £3,000, which is available if you contribute £12,000 or more. The bonus is only applied to the account when you instruct your solicitor or conveyancer.   

The Government automatically adds 25% to the amount you contribute, so this means an additional £1,000 if you contribute the full £4,000.
What conditions apply to the property being purchased?The property for which you use the Help To Buy ISA funds must meet these criteria:UK locationA purchase price of no more than £250,000 (£450,000 in London)The only home you ownYour main residencePurchased using a mortgageIf you use the Lifetime ISA funds towards a property purchase, that property must meet these criteria:UK locationA purchase price of no more than £450,000Purchased at least 12 months after the Lifetime ISA was openedYour main residencePurchased using a mortgage
Where can I invest?
In cash deposits only.  
In cash, stocks and shares, or a combination of the two.   

I’m saving for a property with my partner – can we have a joint ISA?
They must be held in single names.

They must be held in single names.

How does it affect my remaining ISA allowance?
Your Help To Buy ISA is a cash ISA, so you can’t contribute to another cash ISA in the same tax year. You can still contribute to other ISAs.   

You can invest your remaining allowance in any other form of ISA.

Can I withdraw funds?Yes, you can withdraw at any time.Not unless you want to incur a significant penalty. The withdrawal penalty is 20% at present, which effectively means you lose the Government bonus. This penalty rises to 25% on 6 April 2021. You should only withdraw your funds when you are purchasing a home, or when you reach age 60.   

If you already have a Help To Buy ISA, it is possible to contribute both to that account and to a Lifetime ISA in the same tax year. However, you can only use the Government bonus from one of these products.

You can transfer your Help To Buy ISA to a Lifetime ISA. You might do this if you want the potential of better returns than those offered by cash deposits, or if you now want the flexibility to use your savings for retirement purposes.