Another good scheme that is still currently available to all happy reading.
One Lifetime ISA per person, per tax year
Who is eligible?
You must be 18 or over but under 40 to open a Lifetime ISA.
You can use a Lifetime ISA (Individual Savings Account) to buy your first home or save for later life.
You can put in up to £4,000 each year, until you’re 50. The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.
Lifetime ISAs are opened by individuals – you cannot open them with someone else. This is the same for all ISAs. If you plan to buy a home with someone else who is also a first-time buyer, you can each open and save money into your own Lifetime ISA account. You must both meet the individual eligibility criteria (above).
You can open more than one Lifetime ISA during your life, but you can only open one per tax year and put money into one per tax year. Each time you apply for a new Lifetime ISA you will still need to meet the eligibility criteria (above) for opening an account.
How much you can save and how it affects your other ISAs
As long as you have opened an account before you turn 40, you can pay into a Lifetime ISA up to the day before you turn 50.
You can save up to £4,000 into a Lifetime ISA during each tax year, as long as you’re not saving more than the annual overall ISA limit.
The annual overall ISA limit is the maximum total amount you can save into all your ISAs each tax year. The limit for the 2018 to 2019 tax year will be £20,000. Any contribution to a Lifetime ISA counts towards this.
You can transfer your Help to Buy ISA into a Lifetime ISA, but it will count towards your £4,000 annual limit.
How it’s calculated and how you get it
The government will give you a 25% bonus on the total amount you pay into your Lifetime ISA, not including investment interest or investment growth.
That means if you pay in the maximum amount of £4,000 in a year, you’ll receive a tax-free bonus of £1,000 that year.
Money transferred into a Lifetime ISA from another ISA is also eligible for the government bonus.
Once the government bonus has been paid into your Lifetime ISA account, you can invest it just like your other savings and will be able to earn interest or get investment growth on it.
How you claim the bonus
Your Lifetime ISA manager will claim the bonus for you and it will be added automatically to your Lifetime ISA account. Your Lifetime ISA manager is the bank, building society or asset manager where you open your Lifetime ISA.
The bonus will be added to your account every month.
From April 2018 any bonus will be added to your account every month.
If you withdraw money from your Lifetime ISA before you have received the government bonus you will still be entitled to the bonus on your contributions. Your Lifetime ISA manager will claim the bonus in the same way as if the funds had not been withdrawn and pay that bonus to you (either into your Lifetime ISA or directly to you).
Special rules apply to withdrawals in the 2017-18 tax year or if you wish to cancel an account within 30 days of opening it.
You can withdraw your funds, including the government bonus, without a government charge in any of the following circumstances:
- to help buy a first home worth up to £450,000 at any time from 12 months after you first save into the account
- if you become terminally ill
- from the age of 60
If you close the account within a 30 day cooling off period (as set out by the Financial Conduct Authority), no government charge is payable. You will not receive any government bonus on money you paid into the account.
Fees and charges for managing a Lifetime ISA may be paid directly to the Lifetime ISA manager from your Lifetime ISA without incurring a government withdrawal charge
You must be a first-time buyer to put the Lifetime ISA towards your first home. A first-time buyer is someone who does not own, and has never owned, a home anywhere in the UK or the rest of the world.
To be able to be eligible for the government bonus, you must have opened a Lifetime ISA at least 12 months ago.
The home you buy must:
- be in the UK
- have a price of £450,000 or less
- be the only home you will own
- be where you intend to live
- be bought with a mortgage
If you’re buying with someone else and they are also a first-time buyer, you can put both bonuses towards the purchase of your home. The price of the home still mustn’t be more than £450,000.
If you’re buying a home with someone who has owned a property before they don’t count as a first-time buyer. But you can still put your own bonus towards the price of the home you’re buying together.
You can use your Lifetime ISA with other government schemes as long as you meet the eligibility requirements of the other schemes you wish to participate in.
You can use the Lifetime ISA to buy land for a self-build property as long as the purchase meets all the other criteria for property purchase through the scheme.
Speak to your solicitor or conveyancer if you’re not sure whether the property you are purchasing is within the price limit of the Lifetime ISA and if you can use your government bonus.
Planning your purchase
Lifetime ISA funds, including the bonus, can be put towards an exchange deposit, provided the property purchase is completed within 90 days of your conveyancer receiving the withdrawn funds from your Lifetime ISA manager.
If it’s taking longer than 90 days for your property purchase to go through, your conveyancer can write to HMRC for an extension.
There is no restriction on which stage of the property purchase you can put your Lifetime ISA funds towards. If it meets the conditions above, you will be able to put them towards a deposit at exchange of contracts.