5 FAQs about Lifetime ISAs

A Lifetime ISA (LISA) is a type of savings account that was introduced by the UK government in 2017. It is designed to help people save for two specific purposes: buying their first home and saving for retirement. The idea behind the LISA is to encourage people to save for the long term by offering them a government bonus on their savings.

The LISA is available to anyone aged between 18 and 39 and allows them to save up to £4,000 per year. The government will then add a 25% bonus to these savings, up to a maximum of £1,000 per year. This means that if you save the maximum amount each year, you could receive a bonus of up to £32,000 over the course of your lifetime.

Below, we’ve answered the 5 most common questions about Lifetime ISAs.

1 - When can I take money out of my Lifetime ISA?

You can withdraw your money tax free when you’re ready to use it for an eligible house purchase (worth up to £450,000), after you turn 60, or if you are terminally ill. The Lifetime ISA must be opened for 12 months from the date of the first payment.

You can take money out at other times too, but there’s usually a 25% charge from the government. This could mean you get back less than you put in.

2 - What type of property can I buy with my Lifetime ISA?

One of the key benefits of the LISA is that it can be used to buy a first home worth up to £450,000. This means that if you are a first-time buyer, you could use your LISA savings and bonus to help fund your deposit, making it easier to get onto the property ladder.

However, you’ll need to have had your Lifetime ISA account open for a full year, and you’ll need to be a first-time buyer. The property purchase of £450,000 must include all fixtures and fittings, and the property as your main residence.

The property will require a mortgage, regulated home purchase plan or through a shared ownership arrangement. For more details on this, please contact one of our advisers today on enquiries@ramsayandwhite.com

3 – What happens to my LISA if I die?

If you die, the money you have invested will be passed on to your beneficiaries. After your death, your Lifetime ISA will retain its tax benefits, but only if the administration of your estate is completed, or the LISA is closed by your beneficiary. If neither of those two options have been completed within three years, your LISA will be automatically closed.

It’s worth noting, that the government withdrawal charge of 25% doesn’t apply after your death, meaning your beneficiaries can inherit full value – though it will be subject to inheritance tax.  

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4 - How and when do I get the government bonus?

Lifetime ISA bonuses are paid out at the end of each month and are based on your total contributions in the previous month. The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.

5 - Can I open a Lifetime ISA if I have other ISAs?

Yes. You can open other types of ISAs like Cash ISAs, Stocks and Shares ISAs or Innovative Finance ISAs, alongside your LISA. You can open more than one Lifetime ISA, however, you are limited to only paying into one LISA per tax year.

You can contribute up to £20,000 across all ISAs accounts in 2023/2024 tax year, with up to £4,000 of that in the Lifetime ISA. This means you can save £16,000 in the other accounts. The LISA government bonus will only be available on your contribution to the Lifetime ISA account only.

Do you have any questions about your Lifetime ISA?

Send us an email at enquiries@ramsayandwhite.com and one of our Advisers will be in touch shortly.

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THE VALUE OF YOUR INVESTMENTS MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

This guide is for your general information and use only and is not intended to address your personal investment requirements. The content should not be relied upon in its entirety and shall not be deemed to be, or constitute, advice.

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