Help to Buy: ISA or LISA, which is better?

While you’re no longer able to open a Help to Buy: ISA, you might have opened one in the past and want to figure out whether you should still use this towards a house deposit or whether switching to a LISA would be better. We’ve put together a quick comparison guide to help weigh up the two accounts and explain how they both work.

What’s a Help to Buy: ISA?

This simple savings account was set up for over-16s to get on the property ladder, and was designed for first-time buyers only. The 25% Government bonus we mentioned earlier is payable on balances from the minimum savings of £1,600 up to the maximum £12,000, so could be worth a decent £3,000 in bonuses. We’ve listed a few important notes on the Help to Buy: ISA below.

• If you already have a Help to Buy: ISA, you can save into your account until 30th November 2029
• After this, you’ll still be able to claim your bonus until 30th November 2030
• Any deposits count towards your annual ISA allowance of £20,000 
• You’ll receive your bonus once your house purchase is completed
• You can’t use the savings for a mortgage deposit
  
  

What’s a Lifetime ISA (LISA)?

A LISA can be used for a retirement fund as well as helping to buy your first home. It also gives you the generous 25% Government bonus, except you could earn an impressive £1,000 every tax year, for a maximum £32,000 in bonuses for the account’s lifetime. Here’s how it all works.

• The account can be opened between the ages of 18-39
• As well as the Government bonus (paid up to the age of 50), you’ll also earn interest
• Deposits count towards your annual ISA allowance of £20,000 – the most you’ll be able to put in each year is £4,000
• You can take out your savings at age 60 for retirement, or at any time after 12 months for a first home without incurring a 25% withdrawal charge. So, if you’re wanting to save for a first home and buy within 12 months, a Lifetime ISA might not be for you
• If you make a withdrawal for pretty much any other reason, you’ll likely have to pay a 25% charge, which means you’ll get back less than you put in
  
  

What’s a first-time buyer?

It’s someone who’s never owned a property before, including a home outside of the UK. If you've inherited a property, or owned a share of one, you won’t be classed as a first-time buyer. It’s good to know that you can still use a LISA for building a retirement nest egg, but you’ll need to bear in mind the points we mentioned earlier.

Which should I choose if I want to buy a property quickly?

Remember, you can no longer open a Help to Buy: ISA but you can still use one to buy a house if you already have an account. Just so you know, you’ll need at least £1,600 in the account to start earning the Government bonus but you don’t need to have opened it over a year ago. On the other hand, you’ll need to have had your LISA for at least a year before using the savings – otherwise, you’re risking a 25% Government withdrawal charge. 

Can I use both accounts?

While you can hold both types of ISA (if you opened the Help to Buy: ISA before the 30th November 2019), you can only use the bonus from one to buy your first home. If you have a Help to Buy: ISA and want to put those funds into a Lifetime ISA instead, you’ll need to withdraw your savings, close your account, and then open a LISA – though bear in mind you can only deposit up to £4,000 to begin with, and each tax year following.

What if I’m a first-time buyer over 40?

You can’t open a LISA if you’re over 39. Sorry about that. But, you can still make the most of our other ISA savings accounts, which give you tax-free savings – and if you already have a Help to Buy: ISA, you can continue using it to save for your first home.

Help to Buy: ISA vs Lifetime ISA

Quickly and easily compare accounts with the table below.

	Help to buy: ISA	Lifetime ISA
Who can hold an account?	UK residents aged 16+ and anyone who opened an account before the closure on 30th November 2019. Sorry, you can't open an account after this date.	UK residents 18-39 years old.
Can I open a joint account?	No, but if you're buying your first home with another first-time buyer, and you both hold either of the accounts, you'll each benefit from the 25% Government bonus.
Where can I apply?	Sorry, you can't open this type of account anymore.	You can set one up using our Beehive Money app.
What can I use the account for?	It's only for first-time buyers.	For buying a first home, building a retirement fund, or both. If you've already bought a house, you can still set up an account for a retirement nest egg. Or, use your LISA to buy your first house, then continue saving until you turn 50.
How much do I need in order to open an account?	You can't open an account anymore.	Just £10.
How much can I save each year?	Up to £2,400 a year, topped up to £3,000 with the Government bonus.	Up to £4,000 a year, topped up to £5,000 with the maximum Government bonus.
Can I deposit lump sums?	Sadly not, only monthly savings of £200	Yes.
Tax status	Tax-free.
When is the account available until?	You can hold your account, and claim your bonus, until 30th November 2030.	The foreseeable future. Note that you can only pay into the account, and earn the Government bonus, until you turn 50 — though after this, it’ll still earn interest. You can then withdraw the retirement fund at age 60.
What is the maximum value of the property I can buy?	£450,000 - London £250,000 - rest of the UK	£450,000 throughout the UK
When can I use my ISA to buy my home?	Anytime, once you have over £1,600 saved up.	Anytime after holding the account for 12 months or more without being charged a 25% withdrawal fee.
Can I use the bonus for my first home exchange deposit?	No, unfortunately not. That's because it's released after completion.	Yes, but you must complete on the property within 90 days of your conveyancer receiving the funds. You can read more about it in our Help Centre, just ask BeeBot how to use your Lifetime ISA to buy your first home.
How much bonus can I earn?	You could earn a maximum bonus of £3,000.	The 25% Government bonus is worth up to £1,000 per year, meaning if you hold the account from age 18 and pay the £4,000 limit each year, you could earn a total Government bonus of £32,000 over the lifetime of the account.
When do I get the 25% bonus?	Once the house sale has completed – it's all arranged by your solicitor once you’ve informed your Help to Buy: ISA provider that you’d like to close your account.	Whenever you make a deposit (but allow up to 9 weeks for HMRC to process and pay your bonus).
Maximum savings	There's no maximum saving amount, but the bonus is only payable on the first £12,000 you save.	£128,000 (32 years of £4,000 saving a year).
What is the interest rate on savings with Beehive Money?	Beehive Money doesn't have the Help to Buy: ISA as you are unable to open new accounts anymore - sorry about that. This article is just in case you already have an account with a different provider. If you do, interest is only paid on your balance, not the bonus. You’ll also earn compound interest.	0.50% tax-free p.a./AER paid annually.  Compound interest earned is on the bonus as well as your savings.
Can I withdraw for another reason if I change my mind?	Yes. While you'd forfeit the bonus, you'd still have your savings and any interest earnt.	If you take out your savings for pretty much any reason other than a deposit on a first home, or for retirement at age 60, you'll be charged a 25% Government fee on the withdrawal. This can be risky, as you might get back less than you put in.
Is there a notice period for withdrawals?	No.	No, but you'll need to have held the account for 12 months or more, or you risk a 25% Government withdrawal fee. It’s also advisable to start your LISA withdrawal at least 5 weeks before you will need the funds to complete on your house purchase as withdrawals can take up to 30 days.
Is there a charge for withdrawals?	No, as long as you leave at least £1 in the account. Bear in mind that you can only pay in £200 per month, and if you take money out, it'll count towards the allowance. So, if you paid in £100 and withdrew £50, you'd only be able to pay £100 in for the rest of the month.	No, not if you’re using the money for a first home after 12 months or a retirement fund at 60. Otherwise, a 25% Government fee is charged on the withdrawal, so you could get back less than you paid in.