Granite Coast Financial Advisers
You can use a Lifetime ISA (Individual Savings Account) to buy your first home or save for later life. You must be 18 or over but under 40 to open a Lifetime ISA.
You can put in up to £4,000 each year, until you are 50. The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.
You can hold cash or stocks and shares in your Lifetime ISA, or have a combination of both.
When you turn 50, you will not be able to pay into your Lifetime ISA or earn the 25% bonus. Your account will stay open and your savings will still earn interest or investment returns.
You must be UK resident for tax purposes in order to be able to open one
Withdrawing money from your Lifetime ISA
You can withdraw money from your ISA if you are:
• Buying your first home
• Aged 60 or over
• Terminally ill, with less than 12 months to live
You will pay a withdrawal charge if you withdraw cash or assets for any other reason (also known as making an unauthorised withdrawal). This recovers the government bonus you received on your original savings. The charge is currently 20%. It goes back up to 25% on 6 April 2021.
Buying your first home
You can use your savings to help you buy your first home if all the following apply:
• The property costs £450,000 or less
• You buy the property at least 12 months after you open the Lifetime ISA
• You use a conveyancer or solicitor to act for you in the purchase - the ISA provider will pay the funds directly to them
• You are buying with a mortgage
• When buying a house using a LISA it must be your main residence and not for rental, etc.
Buying with someone else:
If the person you are buying with has a Lifetime ISA, they can use their savings and government bonus too.
They will pay a 20% withdrawal charge to use their Lifetime ISA savings if they own or have a legal interest in property (for example they’re a beneficiary of a trust that includes property).
Help to Buy ISA
If you have a Lifetime ISA and a Help to Buy ISA, you can only use the government bonus from one of them to buy your first home.
You can transfer money from a Help to Buy ISA to a Lifetime ISA. If you transfer money from a Lifetime ISA to a Help to Buy ISA you will have to pay the 20% withdrawal charge.
Saving for later life
You can take your savings out of a Lifetime ISA when you are 60 or over.
You will pay a 20% charge if you withdraw money or transfer the Lifetime ISA to another type of ISA before 60.
If you die your Lifetime ISA ends on the date of your death. There is no charge to withdraw the funds or assets from your account.
A Lifetime ISA is one of a number of ways to save for later life.
Saving within a Lifetime ISA has the same taxation benefits as a regular ISA; it shelters you from income and capital gains tax.
Lifetime ISAs are considered one of the most tax efficient vehicles in the UK tax system; they provide 20% basic rate tax relief on deposits and no taxation on withdrawals.
Granite Coast are Cambridge based financial advisers. If you have any further queries about the above or require any other advice please do not hesitate to contact us firstname.lastname@example.org or 01223 853 599.