What is a Lifetime ISA?
With a Lifetime ISA, savers can receive a 25% bonus which can be put towards buying a home and retirement savings. Declaredly the Government wishes ‘to help young people save flexibly for the long-term throughout their lives’.
If you already have a Lifetime ISA and you're ready to buy a home, read: how to obtain your Government bonus from your Lifetime ISA when buying your first home.
Who is eligible for the Lifetime ISA? | You must be a UK resident or a Crown servant (for example, a member of the armed forces serving abroad), between 18 and 40 years old to open a Lifetime ISA account. |
| What is the maximum you can save? | £128,000 (starting at 18 and finishing at 50 years old) |
| How much can you save per year? | £4,000 per year |
| What is the maximum bonus you can receive? | £32,000 (starting at 18 and finishing at 50 years old) |
| Can you put lump sums in? |
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| How much must be in the account to be eligible for a bonus? | £1 |
| When is the bonus paid? | Monthly from April 2018 |
| Can you invest as well as save? |
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| What's the maximum property price? | £450,000 |
| What is the earliest time when you can withdraw your savings and get your bonus? | After LISA has been opened for 12 months |
| Who can open it? | Anyone aged 18-39 |
| Can I withdraw money if not buying a home? |
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| Is there a charge for withdrawing ISA savings? |
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| Can you use the bonus to fund your deposit on exchange? |
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| How long does it take to draw down the bonus? | 30 days from conveyancer application |
How does the Lifetime ISA work?
- You save up to £4,000 each year and the Government pays you a bonus of 25% of the amount saved. There is no minimum or maximum monthly contribution but you cannot put in more than £4,000 per year.
- You can make contributions and have the bonus added from 18 years old up to age 50.
- Over a lifetime, this means you could save a maximum £128,000 which would mean you receive a maximum £32,000 Government bonus and you stand to receive investment growth both on your contributions and on the bonus.
How do ISAs work?
An ISA, which means Individual Savings Account, is a savings account for which you never have to pay tax on the interest - the Government ostensibly constructed these accounts to encourage people to save. Each year, the Government sets a limit as to how much money you can put into ISA form to take advantage of the tax break - for the tax year 2018 - 2019, the figure has been set at £20,000.
You are well advised to visit HM Government's ISA information page to find out authoritatively what the current rules are, however when last updated, the broad rules for ISAs were as follows:
- You can open up one new cash ISA per year - NB the Help to Buy ISA counts as a cash ISA but the Lifetime ISA does not (read on) so you could choose to open up both at the same time (assuming you haven't already opened up a different cash ISA already for the tax year)
- There are four different types of ISA, namely:
- cash ISAs;
- stocks and shares ISAs;
- innovative finance ISAs; and
- Lifetime ISAs
- You can save up to your maximum allowance for the tax year (£20,000 for 2018/19) and you have free choice as to how you divide up your allowance e.g. you might put it all in one stocks and shares ISA or divide it between all 4 types (but please note, you are restricted as to the maximum you can put into either a Help to Buy ISA (£1,200 per year or £2,400 if starting it up with the £1,200 maximum initial deposit) or a Lifetime ISA (£4,000 per year))
- You have to be a minimum 16 years old to open a cash ISA, 18 years old to open a stocks and shares or an innovative finance ISA and between 18 and 40 to open a LISA
- You have to be resident in the UK or a Crown servant (for example diplomatic or overseas civil service) or their spouse or civil partner to open any ISA.
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
