A Lifetime ISA, like other ISAs (Individual Savings Accounts) is a savings account, the interest on which is shielded from tax. The ISA may be a cash savings ISA or hold shares, etc. At the time of writing each qualifying individual may save up to £20,000 per annum.
The Lifetime ISA is different to the basic ISA in that it has certain additional qualifications meaning that it’s not open to all. It also has one very attractive benefit, namely a substantial Government Bonus every year calculated at 25% of the sum invested every year, up to a maximum of £1,000 per annum. The maximum sum you may invest in a Lifetime ISA is currently £4,000 per annum.
To qualify for a Lifetime ISA you must be aged between 18 and 40 when you open it and you must be resident in the UK for tax purposes or qualify under an exemption (for example, be on overseas diplomatic service).
After the age of 50 you may no longer contribute to your Lifetime ISA and annual Government Bonus’ will cease. You may withdraw funds from your ISA on or after your 60th birthday OR when buying your first home. There is also an option to withdraw if you are unfortunate enough to have been diagnosed with an illness and have less than 12 months to live. If you want to withdraw money before your 60th birthday and you are not buying a first home or otherwise qualify under the abovementioned health clause, you can still do so but you will lose the accrued 25% Government bonuses, plus a ‘withdrawal charge’.
The good news is that if you are buying a first home with your spouse you may both save in your own Lifetime ISAs.
The idea behind the lifetime ISA is that it encourages long term investment and provision for old age or for investment in your first home. The bonuses available seem attractive, but it’s worth noting that this is a long term savings/investment option and not something for the shorter term. For this eventuality, a standard ISA may be more applicable.
The annual £4,000 Lifetime ISA limit forms part of your annual ISA investment limit (currently £20,000 at the time of writing).
Related articles:
Download our Free First Time Buyers Guide
Recent posts
According to a report in the Guardian, senior ministers have asked Treasury officials to look into a “proportional” property tax to see how it would work as an alternative to the existing stamp duty land tax on owner-occupied homes.
More than a quarter of UK adults in long-term relationships (26%) have reported that despite living together, they keep their finances separate from one another.
There has been a rise in both rent and mortgage costs over the last three years, with renters seeing a greater increase in their monthly payments than those with a mortgaged property.
Delayed Start Mortgages
14 days ago
The new Delayed Start Mortgage launched by Skipton Building Society allows first time buyers to postpone the first three mortgage payments. This product has been designed to help soften the blow of moving in costs for first time buyers.
Green Mortgages | Rewards and Benefits
16 days ago
Mortgage lenders are starting to recognise their “Green” responsibilities when it comes to the different products they offer.
A recent study by Boon Brokers where 1,000 people who had used an estate agent over the last year were surveyed, showed that a whopping 52% said they were pressured into using the estate agents’ in-house mortgage broker.
When will mortgage rates fall further?
26 days ago
Analysts are predicting further rate cuts this year, with the next one possibly coming down to 4% when the Bank of England’s Monetary Policy Committee meet on Thursday 7th August 2025.
The Financial Conduct Authority (FCA) has shared new changes to mortgage rules with the aim to simplify remortgaging, and encourage competition within the mortgage market.
More information
Trusted by
