Lisa, Stock + Share, HTB

Freetrade Chat 🔥
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Hi, people of the freetrade world I come thee with questions.

This LISA thing I always believed this was only for richer people who after they maxed out their 20k stocks and shares isa they then put the rest of their spare cash into the LISA and JISA etc but I don’t need to speak about JISA here.

So my issue is as I have stated on here before I suffer from illnesses at times and I always fear for my work which then makes me fear about the likes of universal credit until I get work which I Usally can fast.

The issue is that they won’t help me so everything I’m trying to save now in the stocks and shares would be fruitless as I need to sell to pay bills and everything else because I’m over the limit, as I stated on another post about UC the perks of savers vs people that buy assets to stay under the limit. Which is a sort of scam / working the system whatever you want to call it.

So anyways UC I believe don’t add help to buy ISAs or LISAs now which was added later.

I have maxed out my HTB but the problem is that runs out on 2030 the goverment bonus that is. I have read that it’s better to buy a house with the HTB and use the LISA to live on etc retirement.

I also thought of a stepping stone of pensions like private pension at 55 if I wanted the LISA at 60 then the state pension at 68 or 70 whatever it ends up being.

So the LISA say I could max it out even though I’m late to the party now that would take me 14 years until I’m 50 from then you cannot add to it correct?. This would reduce the amount I can put in my SnS ISA by alot.

I’m wondering if it works out to be better tax wise in the end or does LISA act as a pension in terms of you can take 25% tax free and the rest is taxed. Can you take annity or whatever it’s called with a Lisa?

So as stated above if I saved the LISA from now until I’m 50 I loose out on the HTB bonus but in theory I could reverse this and use the LISA for the home added onto the HTB later on? As you can take the LISA whenever as long as it’s a house? Correct me if I’m wrong and if you don’t buy a house it’s age 60 you need to wait until?.

Theory crafting with no gains or losses from the market just the LISA bonus would be, (hopefully the workings are ok) :-

4,000(1+0.25)^(14) = £90,949.47

This is actully £70,000? Due to zero compounding

Then HTB = £12,000

Then any extras I have from a SnS iSA etc and other savings on the bank.

So is it better to save in both at the same time? I know one is instant cash and one is long term so people would be asking me do I need the cash and I would say no as I have money in the bank encase of an extreme emergency.

I have the plus account as well and keep thinking why don’t I use the LISA. I also hate the fact I never done a LISA when I was younger if it even existed then it’s crazy the amount you could of gotten from age 16(18) until 50.

It’s nice to dream but I didn’t really know anything about finance back then and to be honnest I still feel like a very new beginner.

Sorry for the punctuation and the way this is wrote. I didn’t do well at school and I’m dyslexic, even the spell checker has issues finding words for me all the time.

Thanks folks and I appreciate anyone who takes the time to read that as I know I can waffle on and go on tangents so sorry about that.

O/

PS seems I gor a few things wrong thst being the age a person can open a pension and the maths as you don’t gain compound interest from it so the extra £1,000 is just paid at the end of the year then you can just buy more stocks from it? So really you could calculate e a rough compound interest figure if it’s the likes of an ETF etc?

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HI Kiava,

It all comes down to your long term plans.

What are your current plans for your S&S ISA, if it is for retirement then a LISA would be more beneficial.

The LISA is 100% tax free, once you reach 60 you can withdraw a £1 or the full amount.

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Thanks for getting back. I don’t really know what my plans were for the s n s isa tbh it was more just invest man and try it but I guess you could say I like watching it grow and or financial freedom, but you’re probably correct that I would keep saving into it until retirement.

That only applys if I don’t somehow go ill and need to dip into it. So far I haven’t had to use it once and always stick firm with that. The only rule I have broke is I didn’t invest for 4 months but it worked out for now as I bought that dip we just had with it.

I keep seeing everywhere that the LISA is taxable after you take out the 25% tax free? Or has it changed.

I’m sure it would help me out some and anyway in 2030 I need to think about what to do about thst HTB money as I don’t know if it stays as an isa which means I don’t want it sitting in the bank. I need to find out more about that one.

I read as well on other discriptions that adding to a LISA counts towards your 20k limit? Surely that’s not right if others are using a Lisa after they max their s n s isa out.

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It does

The Lifetime ISA limit of £4,000 counts towards your annual ISA limit. This is £20,000 for the 2024 to 2025 tax year.

I think its more people are maxing their pensions after ISAs etc…

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A SIPP can be taxed after the 25 percent has been taken out but everything in a LISA is tax free.

In terms of retirement the most tax efficient way would be to draw from your pension up to the tax free allowance and then supplement your income with LISA withdrawals, effectively paying no tax.

The LISA 4k is included in the 20k overall allowance so you could put 16k in a Stocks ISA and 4k in a LISA. Or 10k cash ISA, 6k stocks ISA and 4k LISA.

If there is any possibility at all that you will need the funds then do not go for the LISA as the withdrawal penalty is more than the bonus, you will lose money.

It doesn’t need to be all or nothing though you could split the money you have to
Invest across the LISA and the stocks ISA.

I currently prioritise my LISA and then anything else goes in the shares ISA as my main focus is saving for retirement as I have a house.

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This is a helpful summary for understanding the differences between LISA/ISA/SIPP

Relatedly The Flowchart is also a very helpful reference for general financial planning:

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Hi everyone thanks for the feed back. I was off the radar this weekend and also it seems I was getting mixed up with LISA and SIPP I thought freetrade done the LISA with the plus account so that’s my bad.

Thanks for the information and I will look into this more during the week.