The start of the new tax year on 6 April 2017 saw the launch of the Lifetime ISA (LISA). A new type of Individual Savings Account (ISA) to help save for a first home or towards retirement at the same time. To be eligible, you have to be aged between 18 and 39 years old.

You can save up to £4,000 which will be supplemented by a government bonus of 25% of the money you put in up to a maximum bonus of £1,000 each year.

You’ll obtain a bonus on any savings you make up until you reach 50 years of age, at which point you won’t be able to make any more payments into your account.

If you already have a Help to Buy: ISA, you’ll be able to transfer your balance into a LISA at any time if the amount doesn’t exceed £4,000. In the tax year 2017/18 only, you’ll be able to transfer the full balance of your Help to Buy: ISA – as it stood on 5 April 2017 – into your LISA without affecting the £4,000 limit. Alternatively, you could keep your Help to Buy: ISA and open a LISA, although you’ll only be able to use the bonus from one of these accounts towards buying your first home.

You will be able to use funds held in a LISA after 12 months to buy a first home valued up to £450,000. You must be buying your home with a mortgage.

Alternatively, after your 60th birthday, you will be able to take out all your savings from your LISA tax-efficiently for use in retirement.

A LISA can be accessed like a normal ISA at any time for any reason, but if not used as above, you’ll have to pay a withdrawal charge of 25% of the amount you withdraw (being the government bonus plus a penalty of 5%). However, this withdrawal charge won’t apply if you decide to cash in your account during the first 12 months after its launch.

If you want to use your LISA to save for a property as well as for retirement, once you’ve bought your first home, you will be able to continue saving into your LISA as you did previously. You’ll continue to receive the government bonus on your contributions until you reach the age of 50.

LISAs can hold cash, stocks and shares qualifying investments, or a combination of both. The option that is right for you will depend on your approach to risk, your investment time frame and how confident you are making your own investment decisions.

 

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

STOCKS & SHARES ISA INVESTMENTS DO NOT INCLUDE THE SAME SECURITY OF CAPITAL THAT IS AFFORDED WITH A CASH ISA.

 

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