Lifetime ISA

How does a Lifetime ISA work and who can open one?

As well as to save for later life, you can use a Lifetime ISA to buy your first home. To open one, you’ll need to be over 18, but under 40 years old.

Up until you’re 50, you can  save up to £4,000 per year, and you’ll need to make your first payment into your account before you turn 40.

How can a Lifetime ISA help me buy a property?

The government will add a 25% ‘top up’ bonus to your saved amount, up to a maximum of £1,000 per year, which you can use towards buying your first home.

You can then use your saved funds to buy your first home, as long as the following criteria are met:

• Your home costs £450,000 or less
• Your home purchase happens more than 12 months after you’ve made your first payment into your ISA
• Your home is purchased via a solicitor or conveyancer – they will take the funds directly from the ISA provider and pay the money on your behalf
• You’re buying your home using a mortgage

There are no restrictions around which stage of the property purchase you can put your Lifetime ISA funds towards. As long as you meet the above criteria, you can put them towards a deposit at exchange of contracts.

It’s important to note that the property purchase must complete within 90 days of your conveyancer receiving the withdrawn funds. If it takes longer than that, your conveyancer can write to HMRC to request an extension.

Are there limitations on how I spend the money?

You can withdraw money from your ISA and claim any government bonus you’ve accrued, as long as you meet one of the following criteria:

• you’re buying your first home, and your account has been open for more than a year
• you’re aged 60 or over
• you’re terminally ill, with less than 12 months to live

Is there a withdrawal charge?

If you withdraw your money and don’t meet the criteria listed above, there’ll be a withdrawal charge of 25%. This amount will mean the government takes back any bonus you’d accrued on your original savings.

Can I invest in stocks and shares?

You can use your Lifetime ISA for cash or stocks and shares. Or you can also save a combination of the two.

I’m buying a home jointly – can we both use our Lifetime ISA bonuses?

If you’re buying with someone else who also has a Lifetime ISA, they can also use their savings and government bonus towards the cost of the home you’re buying.

Where does this sit within my overall ISA allowance?

The Lifetime ISA limit of £4,000 counts towards your annual ISA limit, which is £20,000 for the 2022-2023 tax year. So if you paid the full £4,000 into your Lifetime ISA, you could still pay £16,000 into other ISA products.

For more information on Lifetime ISAs, check out the official government website.