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
Budgeting over the Christmas Period
3 days ago
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
7 days ago
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.
We look at why mortgage rates increased following the Bank of England's choice to reduce the bank rate, and should you fix now?
UK 2024 Autumn Budget: Housing
30 Oct 2024
On 30th October 2024 the Chancellor, Rachel Reeves delivered the Autumn budget which we had previously been warned would be “difficult”. Below we have summarised the main housing points.
Talking about money with kids
23 Oct 2024
In an increasingly cashless society, money is an intangible concept for children to grasp. In the days of coins and notes, kids could see money as something physical you require to purchase goods and services.
In order to help teach your children about money, we have listed some tips below;
Labour Autumn Budget Predictions: Housing
18 Oct 2024
The UK’s chancellor, Rachel Reeves will deliver the Labour government’s autumn budget at the end of the month, we take a look at what could be announced in relation to housing.
Recent research from Halifax has revealed the most sought-after locations for first time buyers in Britain.
The data which was taken from the Halifax House Price Index looked at areas outside of London where those looking to purchase their first property were buying. Despite high property prices and increased rates, these first time buyer hotspots have remained popular.
How can I look after my mental health?
7 Oct 2024
Taking care of your mental health means looking after your emotional, psychological, and social wellbeing. There are several ways we can practice self-care that will help to improve our physical and mental health. This can help to reduce our risk of illness, manage stress, and boost our energy levels!
More information
Trusted by
