What’s a Lifetime ISA?
Like its cousin the Help to Buy ISA, the Lifetime ISA (LISA) is designed to get you on the bottom rung of the property ladder and help you save towards your first home. But, unlike the Help to Buy ISA, you can keep saving after you’ve used it for your mortgage deposit until you hit 60 to bump up your retirement nest egg.
If you’re aged between 18 and 39 and are a first-time buyer, you can take a LISA out and save a max of £4,000 every year. You can contribute to it until you’re 50 and you’ll receive a 25% bonus from the Government every year. This is paid monthly, so put something in every month and the bonus will get paid.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.
How it works
If you open a LISA (or several) at 18 and save the full £4,000 every year until you reach 50, your bonus will be £33,000. Pool resources with another first-time buyer and you’ll have a tidy £66,000 between you for your new home.
There’s nothing stopping you having an ISA alongside your LISA but remember to stay within the £20,000 allowable limit this tax year. You can take a new one out every year if you want too – you just need to have had a LISA open for at least 12 months to use it for a deposit.
Things to think about
- LISAs must be used on homes that cost £450,000 or less.
- You can combine your LISA with a Help to Buy ISA, but you’ll only get the bonus on one of them.
- Your home purchase must be completed within 90 days of withdrawing funds. You’ll need an extension from HMRC if it takes longer.
- If you decide to take the cash at 60, it’s all tax free whether taken as a lump sum or in regular instalments.
To talk to us about investing in a Lifetime ISA, please send us a message using the form on the right-hand side of this page. We’ll get back to you as soon as we can.
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