Help to Buy ISA vs Lifetime ISA – why only one of the accounts offers £33,000 bonus
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While it’s possible to have both a Help to Buy ISA and a Lifetime ISA, the 25 percent government bonus can only be claimed on one of these accounts. The former account is no longer open to new savers, however those who do have an account may wonder which account to opt for when it comes to the bonus.
There are a whole host of factors which can impact this choice.
For instance, when a person wants to purchase a property can play a part in the decision.
Those who have more time on their hands until they plan to buy may want to look at the maximum bonus they could receive.
And of course, those who hadn’t opened a Help to Buy ISA account prior to the deadline for doing so last year will not have this option.
Help to Buy ISA bonus
A person can pay up to £200 per month into their Help to Buy ISA – with an additional £1,000 lump sum deposit being allowed in the first month.
Once £1,600 has been saved in the account, it’s then possible to claim the 25 percent government bonus – of which the minimum is £400.
There is also an upper limit when it comes to the Help to Buy ISA bonus.
The maximum government bonus which can be paid on this account is £3,000.
To receive this, the saver will need to have put £12,000 into the account.
The way in which the bonus is paid differs from the Lifetime ISA, with the former requiring a solicitor or conveyancer to apply for the bonus.
Lifetime ISA bonus
A person can open a Lifetime ISA from the age of 18, up until they turn 40.
They can then put in up to £4,000 each tax year, until they’re 50.
Once they reach this age, they will no longer be able to pay into their Lifetime ISA.
The account will remain open, however.
Despite being closed to new contributions, the money in the account will still be eligible to earn interest or investment returns.
The maximum government bonus per tax year is £1,000.
As such, it’s possible to get a maximum government bonus of £33,000, depending on when the saver’s birthday falls during the year.
It is important to note, however, that the £4,000 limit counts towards a person’s annual allowance.
In the 2020 to 2021 tax year, this allowance is £20,000 per person across ISAs.
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