The Lifetime ISA – Q & A

Posted 4 April 2016 by Keith Osborne

WhatHouse? looks at the frequently asked questions about the latest savings scheme aimed at prospective property buyers by the government...

The Lifetime Independent Savings Account (Lifetime ISA, or LISA) is a government savings initiative designed to help young people put money towards buying their first home and/or retirement. It was announced by Chancellor George Osborne in the 2016 Budget speech.

Here are some questions and answers to help explain more about this government-introduced savings scheme.

How does a Lifetime ISA work?

The government will add 25% to any amount put into a Lifetime ISA. In other words, for every four pounds saved, the government will add one pound. No tax is paid on these savings or interest gained.

How much money can I save a year?

You can save up to £4,000 in one year. If this was done, a bonus of £1,000 would be added making the total saved £5,000.

When is the Lifetime ISA launched?

The Lifetime Isa is available from 6 April 2017.

Do I need to be a certain age?

You must be aged between 18 and 40 (from 6 April 2017). The 25% bonus will apply to any savings put into the Isa account before the account holder turns 50.

Are there any other eligibility criteria/restrictions?

  • You must be a first-time buyer inside and outside the UK.
  • You need to buy a home costing less than £450,000
  • You can't rent out the property you're intending to buy

Can I have a Help to Buy ISA and a Lifetime ISA at the same time?

Yes, you can have the two accounts at the same time. However, you can only earn the bonus on one account or the other, not both.

When is the bonus paid?

The bonus is paid annually at the end of each tax year. You'll be eligible for interest on the bonus as soon as it's paid into your account. Otherwise, your money will be paid to you when you complete the purchase of a property. Once you have bought the property you can still use the account to save for your retirement.

How soon can I take money out of the account?

You can only begin withdrawing money after 12 months of it being open.

Can I use the savings for any purpose?

The Lifetime savings are designed for buying a residential property under £450,000. Otherwise, once you turn 60, the money can be withdrawn and used for your retirement. If you take the money out for another purpose to that of buying a home before you're 60, there will be a 5% penalty levied in addition to you losing the bonus (unless you have a terminal illness).

Is there a minimum amount I need to save each month?

No, you can save as little as you want each month in the account.

What if we are a couple wanting to save?

If you're a couple, you can each have a separate account complete with separate bonus earned.

What are the main differences between a Help to Buy ISA and Lifetime ISA?

  • With the Help to Buy ISA you can save a maximum of £2,400 a year (£3,400 in the first year) whereas with the Lifetime ISA it's £4,000 a year
  • The maximum lifetime bonus given with Lifetime ISA is £32,000 whereas with Help to Buy ISA it's £12,000
  • The bonus with LISA is paid annually whereas with Help to Buy it's only given when you buy a home
  • Outside London, the maximum property price with Help to Buy ISA is £250,000 as opposed to £450,000 with Lifetime ISA. However, it's £450,000 for both schemes within London.

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