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
Data from Rightmove shows that Sunbury-on-Thames in Surrey was the number one house price hotspot in 2024. The prices in this area climbed an impressive 12.5% - increasing from an average price of £527,005 in 2023 to £592,926 in 2024.
Buy to Let Stamp Duty Changes April 2025
3 days ago
On the 31st October 2024 stamp duty for those purchasing additional properties increased by 2% from 3% to 5%.
From 1st April 2025 the threshold will be reducing from £250,000 to £125,000
Where did Londoners move to in 2024?
8 days ago
Research from Metro shows that those who chose to move home didn’t actually move that far away. With a 430g pack of chicken costing on average almost double in London than the rest of the UK, it's no wonder some people are choosing a change of scenery to save a few pennies.
Reasons to get a Buy to Let Mortgage
12 days ago
Following recent changes in the Buy to Let market, some investors may find this product less appealing. However, if done correctly, building a buy to let portfolio can be very profitable.
Stamp duty: how is it changing in 2025?
25 days ago
Helping you understand the upcoming changes in stamp duty (SDLT) from April 2025.
UK homebuyers and homeowners are hoping for stability in 2025.
We are hoping that mortgage rates will ease this year, but how drastically depends on inflation trends, swap rates, and the Bank of England’s decisions in which way the base rate should go.
Budgeting over the Christmas Period
3 Dec 2024
The most wonderful time of the year can easily turn into the most expensive time of the year. Watching the pennies doesn’t mean that the Christmas festivities have to stop, following a few budgeting tips can mean you still have a special Christmas and don’t go into the new year in debt.
Preparing your home to sell in winter
29 Nov 2024
December is usually a less desirable time to buy as many people don’t want to move over the holidays. However, prospective buyers do start to look at this time. Selling your home in winter may require a bit of extra attention to showcase your property at its best.
More information
Trusted by
