Here we seek to address some frequently asked questions about the Lifetime ISA.
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No, you can only open a Lifetime ISA before your 40th birthday. Once opened savers can contribute up until the day before their 50th birthday and receive a government bonus of up to £1,000 per year on any contributions.
Yes, you can open and pay into other types of ISAs (Cash ISAs, Stocks & Shares ISAs or Innovative Finance ISAs) alongside your Lifetime ISA. As with other ISAs, you will only be able to pay into one Lifetime ISA in each tax year.
You can contribute up to £20,000 across all ISAs in the 2017/18 tax year, of which £4,000 can be contributed to a Lifetime ISA. The government bonus (up to £1,000 per year) will not count towards the £20,000 overall ISA limit or the £4,000 Lifetime ISA limit.
Under HMRC rules, only the account holder can open and pay into the Lifetime ISA. However, you can choose to gift money to the account holder directly.
No, you can only open a Lifetime ISA in individual names. This is the same with all ISAs. However, each individual under 40 can open a Lifetime ISA meaning multiple first time buyers (e.g. couples) can benefit from their bonus when they buy together.
Yes, you can hold a Help to Buy ISA and a Lifetime ISA at the same time, providing your are eligible for both. However, you will only be able to use the bonus from one of the accounts to buy a first home.
Your Lifetime ISA is open from the point at which your first cash contribution reaches the account. This could come from a lump sum payment, a transfer, or your first monthly contribution.
The government bonus will be claimed by your Lifetime ISA provider from HMRC and automatically added to your account.
For contributions made during the 2017/18 tax year (between 6 April 2017 and 5 April 2018), we will claim your bonus from HMRC in April 2018 and it will be paid into your account by 4 May 2018.
From 6 April 2018 onwards, we will claim the bonus at the earliest opportunity and you will receive the bonus by the 6th day of the following month.
You can withdraw money tax free from the Lifetime ISA when used to purchase your first home worth under £450,000 (see ‘What are the restrictions on the property I can buy with my Lifetime ISA?’), after age 60 or following diagnosis of a terminal illness.
If you choose to withdraw the money at another time, this will count as an ‘unlisted withdrawal’ and will have a 25% government withdrawal charge deducted. This charge could result in you getting back less than you invest.
The charge does not apply if you withdraw money in the 2017/18 tax year. Unless you have been diagnosed with a terminal illness your Lifetime ISA will be closed and no bonus will be claimed.
You must not own and have never owned a home to be able to use the money in the Lifetime ISA (including the government’s bonus) to purchase your first property.
The property you buy must be in the UK costing up to £450,000. It must also be funded by a mortgage or regulated home purchase plan meaning a cash purchase would not be permitted.
You will need to have had the Lifetime ISA open for at least 12 months to qualify for the government’s bonus. This means you should be looking to purchase your first property after 6 April 2018 at the earliest.
In most cases, the individual must occupy the property as their only or main residence.
You must not own and have never owned a residential property anywhere in the world, either solely or jointly, to qualify as a first-time buyer.
This includes any property you may have received through inheritance or as a gift.
You will need to contact your conveyancer. They will ask you to complete a declaration, and then provide a declaration to us. We will pay the amount requested directly to the conveyancer. If the purchase does not complete within 90 days of the withdrawal the amount withdrawn will be returned to your Lifetime ISA.
In order to use the Lifetime ISA bonus when purchasing your first home you will need to have had the Lifetime ISA open for at least 12 months.
Yes, you can transfer a Help to Buy ISA to a Lifetime ISA. In doing so you could potentially get a bigger government bonus and also benefit from greater flexibility when saving for your first home.
However, if you use the money from your Lifetime ISA to purchase a property within the first 12 months, you will not receive the government bonus.
Yes, you can transfer other existing ISAs to a Lifetime ISA and benefit from the 25% government bonus.
Transfers from existing ISAs to a Lifetime ISA do not count towards your overall ISA allowance (£20,000 for the 2017/18 tax year). However, they will count towards your Lifetime ISA allowance (£4,000 for the 2017/18 tax year).
Different rules apply when transferring a Help to Buy ISA in 2017/18.
You can choose to open your HL Lifetime ISA with cash, qualify for the government bonus and then choose investments later. There’s no charge to hold cash and no time limit on how long you can hold cash. You may receive a variable rate of interest depending on the value of cash held.
Yes, you can use the Lifetime ISA to invest for both your first home and retirement. If you use all of the funds in your Lifetime ISA to buy your first home then the LISA will be closed. Assuming you are still aged between 18 and 39 you will be able to open a new Lifetime ISA to save for your retirement.
If you do not use all of your Lifetime ISA to purchase your first home then the Lifetime ISA will remain open and you can continue contributing to it until the day before your 50th birthday should you wish to invest for your retirement. Please note that if the Lifetime ISA is closed and you are aged 40 or over you will not be able to open a new Lifetime ISA.
You may receive a variable rate of interest depending on the value of cash held. There is no charge to hold cash in the HL Lifetime ISA and there is no limit on how long you can hold cash.