What Is A Lifetime ISA?

May, 2022

A Lifetime ISA is a type of savings account that was designed specifically for people aged 18-39 who are saving for their first home or retirement. Saving into a Lifetime ISA can give your money a boost because the government adds to your savings, but there are rules around withdrawing your money that you need to know about too.

Key things you need to know

  • You can open a Lifetime ISA if you’re aged 18 to 39, and save up to £4,000 tax-free each year, up to and including the day before your 50th birthday.
  • The government pays a 25% bonus on top of your contributions up to a maximum of £1,000 a year.
  • Your £4,000 Lifetime ISA allowance forms part of your overall £20,000 annual ISA allowance.
  • If you pay in your full allowance each year between the ages of 18 and 49, you can gain a total bonus of up to £32,000.
  • You can withdraw from your lifetime ISA after 12 months from your first payment in to buy a house with a purchase price of up to £450k.
  • For any other withdrawals before the age of 60 a 25% government withdrawal charge applies, meaning you’d get back less than you paid in.

Is the Lifetime ISA right for me?

A Lifetime ISA may not be right for you if you require any access other than to purchase your first home or retirement because there are restrictions around when you can withdraw your money.

Some ISAs are flexible, which means you can withdraw and pay back in throughout the tax year without affecting your overall annual ISA allowance. However, Lifetime ISAs are not flexible, so it will not be possible for withdrawals to be made and replaced without affecting your annual Lifetime ISA allowance or your overall ISA allowance.

If you close your Lifetime ISA after you reach the age of 40 you won’t be able to open a new one. If you intend to use your Lifetime ISA savings towards buying your first home or to save towards retirement, you may wish to leave a small amount in the account so you can continue to save in it in future.

How does the Lifetime ISA government bonus work?

The government will pay a 25% bonus on top of your contributions up to a maximum of £1,000 each tax year.


Are you thinking of selling?

HS Homes of Solihull is a small independent estate agent based in Shirley, Solihull. If you are interested to know what your home is worth, call us on 0121 430 4448. Alternatively, click here to book a free market appraisal.

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