Martin Lewis: Help to Buy ISA or a Lifetime ISA? Money Saving Expert advises which to have

For those thinking about transferring an existing Help to Buy ISA to a Lifetime ISA, your decision needs to be a quick one. 

Martin Lewis revealed on The Martin Lewis Money Show whether you should stick with a Help to Buy ISA or switch to a Lifetime ISA with the deadline fast approaching. 

From the new tax year, April 6, the rules on transferring a Help To Buy ISA to a Lifetime ISA are going to change. 

In the current 2017/18 tax year you can transfer the value as of your Help to Buy ISA at April 5 2017 into a LISA without it counting towards tour payment for the year. 

But all money you move in after will eat up your LISA allowance. 

For those who have a Help To Buy ISA with Skipton Building Society the transfer deadline is even sooner – March 1. 

Martin said: So if you want to transfer you better get your skates on!” 

So should you stick with a Help To Buy ISA or transfer to a LISA? 

Martin listed what both savings account offer:

• The opening age for a Help to Buy ISA is 16 whereas its 18 to 39 for a LISA
• The maximum savings per year is £2,400 with a Help To Buy ISA but more, at £4,000, with a LISA
• The maximum home price with a Help to Buy ISA is £250,000, whereas its £450,000 with a LISA
• But when it comes to withdrawing money from either, with the Help To Buy ISA there’s no penalty if you don’t use the money towards a home, but tire’s a 6 per cent penalty with the LISA

Martin’s advice as to which one to go for? 

He said: “There’s big money to be made having a LISA, but make sure you’re going to buy a house. 

“But if there’s a real chance you won’t buy a house within the first year, it’s safer to stay with a Help to Buy ISA.” 

So what is a Help to Buy ISA? 

The ISA is designed to help first-time buyers save up a deposit for their home. 

The government adds 25 per cent to the savings – up to maximum of £3,000 on savings of £12,000

So what is the LISA?

The Lifetime ISA launched in April last year, and Martin appeared on This Morning at the time to explain it. 

He said: “The LISA is a tax-free wrapper that lets you put up to £4,000 in it every year as cash savings paying interest, or stocks & shares giving investment growth (or loss).

“You get a 25 per cent bonus on everything you put in. For every pound you contribute, the state adds 25 per cent each year, until you’re 50. So if you save the maximum £4,000 a year, you get £1,000 added. Someone starting at 18 maxing it annually could get £32,000 added (if the system doesn’t change).”