Guide to Lifetime ISAs
Allowances and rules explained
A Lifetime ISA (LISA) is a dual-purpose ISA, designed to help those saving for a first home and retirement.
We don’t offer a Lifetime ISA at the moment, but here’s some information about how they work.
What is a Lifetime ISA?
LISA is a new type of ISA. You’re able to pay into one Lifetime ISA in each tax year, as well as a cash ISA, stocks and shares ISA, and an innovative finance ISA, within the new overall ISA limit of £20,000 in the 2018/19 tax year.
More information is available in our guide to ISA allowances.
Who can open one?
You’re able to open a Lifetime ISA if you’re aged between 18 and 39. You can save up to £4,000 each tax year, every year until your 50th birthday.
The government will pay an annual bonus of 25% (capped at £1,000 p.a.) on any contributions you make.
Funds can be withdrawn tax-free at any time in order to buy a first home worth up to £450,000, and from age 60 for any purpose.
You can open more than one Lifetime ISA, but will only be able to pay into one in each tax year.
What is the government bonus?
The government will provide a bonus of 25% on contributions made during the tax year.
For the 2017/18 tax year, where you’ve made the maximum contribution of £4,000 into your Lifetime ISA, the bonus of £1,000 will be paid directly into your Lifetime ISA at the end of the first tax year, in April 2018.
From April 2018, the bonus will be paid on a monthly basis.
Withdrawing from a Lifetime ISA?
To buy a first home
The savings and the bonus can be used towards a deposit on a first home worth up to £450,000.
Accounts are limited to one per person rather than one per home – so 2 first-time buyers can both receive a bonus when buying together.
The savings and bonus can be accessed tax-free, without penalty, once you’ve turned 60 years old.
You can make withdrawals that aren’t for a first house purchase or retirement, but a 25% charge applies to the amount being withdrawn. This returns the bonus element of the fund to the government, with an additional charge. You will still have access to your savings and any interest earned on them, minus the charge. Please bear in mind that if you make a withdrawal before you receive your first bonus, the charge will still be made so you won’t be able to take out as much as you deposited.
In certain circumstances – eg, a terminal illness or upon death – there’ll be no charge to close the account.
Will I earn tax-free interest on my LISA?
Yes, tax-free interest will be earned on all balances.
What happens if I decide not to buy a house once I have opened a LISA?
You can carry on saving towards retirement, or withdraw the funds subject to the 25% withdrawal charge mentioned above.
What happens if my house purchase falls through after I’ve closed my LISA?
The original LISA can be re-opened, and the amount you’d saved replaced.
Help to Buy: ISA
Help with saving towards your first home
If you bank with us, you could open an ISA online in minutes.
First-time buyer mortgages
Start the journey to your first home
Find out how to buy a home and take out a mortgage, get tips on what to do if you can’t save the deposit you need and work out much you could borrow.