Many of us are aware of the basic ‘ISA’ (Income Savings Account). The idea is that individuals may invest cash, up to a capped amount, every year either in a savings account, stocks and shares or even in more innovative peer-to-peer lending schemes.

The capped sum is £20,000 per annum. Returns on this capital are tax-free.

Various schemes have been introduced by the government in an effort to enable first-time buyers to get into the market with mixed success. Help to Buy mortgages being one of the most prominent schemes, allowing buyers of new homes to borrow up to 25% of the home’s value as an equity loan. In tandem with this, the ‘LISA’ has been introduced for younger individuals in the hope that by incentivising saving, young people will be encouraged to build a lump sum, either for the purchase of a home or for other reasons.

The ‘LISA’ may be opened by anyone between the ages of 18 and 39. As with other ISA’s, the annual investment limit is £20,000 per annum and return on the sum invested is tax-free.

The LISA differs from other ISAs in that the government are offering an annual bonus of up to 25% of the annual sum invested, up to £1,000 per annum. The ‘LISA’ can be kept open until the individual’s 50th birthday and, in addition, you will be entitled to a £10,000 bonus if you pay in the maximum £20,000 per annum every year between the ages of 40 and 50.

Your LISA can be used to help you buy a home or as part of your retirement fund. You can also withdraw cash for other reasons, but there will be a charge for this equivalent to *25% of the sum withdrawn, up until the age of 60. An exception to this would be if you were diagnosed with a terminal illness.

It’s worth noting that the bonus is calculated monthly on the sums introduced by the 6th of each month, so to maximise the bonus you’d do well to make sure you time your direct debits well!

*Following HM Treasury’s announcement on the 1st May the government withdrawal charge will be reduced from 25% to 20% for withdrawals between 6 March 2020 and 5 April 2021.

Related articles:

Download our Free First Time Buyers Guide

Recent posts

Research from buy-to-let lender, Landbay, shows that UK landlords are looking at raising rents ahead of the Renters' Rights Bill which is due to come into force this year.

Data shows landlords could miss out on green mortgages due to expired energy performance certificates.

Buying a house is a big deal, and where you are planning to buy will make a difference financially. In this short blog, we look at the most affordable and most expensive areas and how much you need to be earning to buy in there.

Equity release is a type of mortgage that allows homeowners 55 and over to access money from their property's equity without having to leave their home. This is done by securing a loan against the house which is usually repaid by selling the property when the borrower passes away or has to move into long-term care.

It’s important to ask questions about the property you are interested in before taking that step to make an offer. A little probing can make all the difference between buying your dream house or something that requires a lot of work.

There are millions of homeowners over the age of 60 who are likely to release money from their homes to pay for their lifestyle during retirement giving those who are 'asset rich but cash poor' a way to live out their retirement the way they wish. 

The average age of a first-time buyer in the UK is two years older than 10 years ago. This is understandable with managing the cost-of-living and challenges within the economy such as high interest rates making it difficult to get onto the property ladder.

Skipton Building Society launches ‘Delayed Start’ mortgage meaning first time buyers won’t be required to make repayments for the first three months. 

According to a survey by Skipton, first time buyers who bought their home in the last five years found that in the first three months of living there, they were spending upwards of £30,000.