Further details are emerging on the Lifetime ISA from HM Treasury, which demonstrate how these are intended to operate.
The Lifetime ISA was first introduced at the last Budget and will be available from April 2017. Benefits include:
- Open a Lifetime ISA account between the ages of 18 and 40, and any savings you put into it before your 50th birthday will receive an added 25% bonus from the government accounts
- There is no maximum monthly contribution up to £4,000 a year
- Savings can be put towards a first home worth up to £450,000 across the country
- Limits apply per person rather than per household – so two first time buyers can both use their savings (including the bonus) when buying together
- If you have a Help to Buy: ISA you can transfer those savings into the Lifetime ISA in 2017-18, or continue saving into both – but you will only be able to use the bonus from one to buy a house
- After your 60th birthday you can take out all the savings (including the bonus) tax-free
- You can withdraw the money at any other time, but you will pay a 25% charge – this recovers the government bonus and applies a small charge
- Confirmation has come through in the last week that the bonus will actually be paid monthly from 2018/19 – previously it was intended that this would be applied at the end of the tax year.
- George Houston, Senior Technical and Development Manager, commented:
“Back at the Budget when this latest addition to the ISA “family” was announced, it felt like the former Chancellor had started the journey of bridging the gap between pensions and ISAs.
Coming at a time when the ISA subscription limit is increased to £20,000 for each individual, clients will undoubtedly be keen to take advantage of the new Lifetime ISA and, as long as they can fit into the qualifying terms for the bonus, the additional boost to returns is to be welcomed”.
Start a conversation today
Get in touch with a member of the Mattioli Woods team below. We’re always on hand to assist.