Lifetime ISAs – An Overview

Please note that the value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.

What are Lifetime ISAs?

A Lifetime ISA (also known as a LISA) is designed to help a person aged between 18 and 39 save up for their first home or for retirement. Contributions of up to £4,000 per annum can be made up to the age of 50.

The Government will add a 25% bonus to these contributions, so those who save the maximum will receive a £1,000 bonus each year from the Government. You must make your first payment into your LISA before the age of 40. Only an individual’s own money may be contributed to their LISA accounts.

Lifetime ISAs can be held as cash or invested in stocks and shares or a combination of both.

Can I open a Lifetime ISA?

Individuals can open a new LISA any time from their 18th birthday until just before their 40th birthday. After this date, they are not able to open a new LISA, but they can still pay into an existing account until their 50th birthday and can also transfer their LISA between ISA managers, including to a new manager.

The £4,000 LISA allowance also counts towards the £20,000 total ISA allowance.

Can Lifetime ISAs be used to buy a first home?

A LISA including the Government bonus, can be used to help buy a first home worth up to £450,000. Please note that an individual must be buying their first property with a mortgage and must use a conveyancer or solicitor to act for them in the property purchase. The LISA provider will pay the funds directly to the Solicitor or Conveyancer acting on the purchaser’s behalf.

Can I withdraw from a Lifetime ISA?

The funds saved, including the Government bonus, can be withdrawn from the LISA from the age of 60 tax-free for any purpose. Individuals can only access their LISA after twelve months from when it was first funded.

LISA holders can also access their savings if they become terminally ill. Withdrawals at any time, for other purposes can be made but will be subject to a 25% Government charge.

Tax considerations

Any investment returns received will be tax-free. There is no personal tax on any income taken and no capital gains tax on any gains made.

The value of an individual’s LISA and other ISAs will be included in their estate for Inheritance Tax purposes on their death (ISAs invested in shares listed on alternative investment markets may qualify for up to 100% Business Relief).

As with all long-term investments, individuals will need to consider whether a LISA is appropriate for their current circumstances and future savings needs. An Independent Financial Adviser can help with this.

N.B The Lifetime ISA allowance and ISA allowance figures are correct as of the 2023/24 tax year but are subject to change.