The Lifetime Individual Savings Account (ISA) is a longer term tax-free account that receives a government bonus. The accounts will be available from 6 April 2017. HMRC have produced a helpful guide on the account and some key points are outlined below:
- You can open a Lifetime ISA if you’re aged 18 or over but under 40.
- As with other ISAs you won’t pay tax on any interest, income or capital gains from cash or investments held within your Lifetime ISA.
- You can save up to £4,000 each year in a Lifetime ISA. There’s no maximum monthly savings contribution, and you can continue to save in it until you reach 50. The account can stay open after then but you can’t make any more payments into it.
- The £4,000 limit, if used, will form part of your overall annual ISA limit. From the tax year 2017 to 2018, the overall annual ISA limit will be £20,000.
- Lifetime ISAs can hold cash, stocks and shares qualifying investments, or a combination of both.
- When you save into your Lifetime ISA, you’ll receive a government bonus of 25% of the money you put in, up to a maximum of £1,000 a year.
- You can withdraw the funds held in your Lifetime ISA before you’re 60, but you’ll have to pay a withdrawal charge of 25% of the amount you withdraw.
- A withdrawal charge will not apply if you are using it towards a first home, aged 60 or terminally ill with less than 12 months to live.
- If you die, your Lifetime ISA will end on the date of your death and there won’t be a withdrawal charge for withdrawing funds or assets from your account.
- You can transfer your Lifetime ISA to another Lifetime ISA with a different provider without incurring a withdrawal charge. If you transfer it to a different type of ISA, you’ll have to pay a withdrawal charge.
- Your Lifetime ISA savings and the bonus can be used towards buying your first home, worth up to £450,000, without incurring a withdrawal charge. You must be buying your home with a mortgage.
- You must use a conveyancer or solicitor to act for you in the purchase, and the funds must be paid direct to them by your Lifetime ISA provider.
- Your Lifetime ISA must have been opened for at least 12 months before you can withdraw funds from it to buy your first home.
For more information, please do not hesitate to contact the team at Ward Williams Financial Services Ltd on 01932 830664 or by email on firstname.lastname@example.org.