Lifetime ISA

The Lifetime ISA – everything you need to know

A new ISA variant, the Lifetime ISA (LISA), launched on Thursday 6th April. 

In his final Spring Budget, George Osborne announced the introduction of the Lifetime ISA, designed to make saving attractive to younger people.

The LISA allows UK residents aged between 18 and 40 to pay in up to £4,000 each tax year, with contributions qualifying for a 25% Government top up towards their first home or retirement.

The key points about the LISA are:

  • It will only be available to those aged 18 to 40.
  • The maximum contribution per tax year will be £4,000, which will count towards your overall £20,000 ISA contribution limit for 2017/18.
  • Contributions made before age 50 will receive a 25% “government bonus”. So if you contribute the maximum of £4,000 per year, the government will then contribute an extra £1,000.
  • Investment rules are broadly the same as a normal ISA, meaning you are not required to pay UK income tax or capital gains tax.
  • Savers are eligible to use the funds towards the purchase of a first time property up to the value of £450,000 (under age 60.) Or, the funds can be accessed from the age of 60 or in the event of terminal illness.
  • Other withdrawals will incur a 25% charge, including on growth, except in the first year of the product 2017/18.

Initially you are likely to have a limited choice of LISAs as only a handful of companies are offering the LISA from 6 April. Many providers have not had enough time to develop their offerings because of the legislative delays.

However, if you are tempted by a LISA, do talk to us before taking any action. While a LISA has a useful place in the range of savings products and might look like an attractive alternative to traditional pension arrangements, it will not always be the case.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances. The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.