ISAs  

How to buy a house using a Lifetime Isa

  • Explain who can take out a Lisa
  • Outline requirements needed to use a Lisa to fund a house purchase
  • Explain how declarations to HMRC work
CPD
Approx.30min

The house purchase has to complete within 90 days of the withdrawal. The conveyancer can hold onto the funds for that period.

If the property purchase is continuing but isn’t expected to complete within 90 days of withdrawing funds from the Lisa the conveyancer can request a 60-day extension, followed by a further 30-day extension if needed. Lisa managers must report these extensions to HMRC.

The investor can make two or more charge-free withdrawals for the same property within this period. In practice, this may arise where an outstanding bonus has yet to be claimed from and paid by HMRC  but the investor wants the majority of the funds paid to the conveyancer as soon as possible.

A second charge-free withdrawal can then be made when the bonus has been credited to the account, if the property has not yet been bought at that point.

It may also be the case that the investor has multiple Lisas with different providers, and wants to draw on funds from each of them. A new investor declaration and conveyancer declaration must be provided for each withdrawal.

The investor does not have to withdraw the whole of the Lisa funds - partial withdrawals are allowed.

Likewise, the Lisa does not have to close on withdrawal. It can remain open, even with a nil balance. The investor can then decide to re-start making payments to it later. 

Payment to the conveyancer

The funds withdrawn from the Lisa have to be paid to the conveyancer directly – they cannot be paid to the investor. The Lisa manager has 30 days to make the payment after receipt of valid declarations. 

Declarations

Both the investor and the conveyancer have to sign a declaration giving details of themselves, the Lisa and the property. Model declarations are available from the HMRC website. 

In practice it’s not up to the Lisa manager to decide whether the individual or the property are valid.

It is up to the investor and the conveyancer to ensure they are complying with the requirements for a charge-free withdrawal, and they must make a declaration to this effect when requesting the withdrawal.

The Lisa manager is not required to take any additional steps to verify that the information provided in the declarations is correct and should only prevent a charge-free withdrawal where they have reason to believe that the information given is untrue or incorrect.

So what happens if the house purchase fails or does not complete?

If the house purchase fails or does not complete within the 90 days window (or 150 days, or 180 days if extensions were applied for) after the funds are paid to the conveyancer, then the conveyancer must return the Lisa money in full to the Lisa manager. If there is any shortfall then the conveyancer must explain why it has occurred.