Lifetime ISAs

Our experts tell you everything you need to know about Lifetime ISAs

Our experts at DSR Tax Claims know how hard it is to find good, quality information about HMRC’s tax regulations that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust. Or you can check out our online calculator to see if you could be due a refund.

What is a Lifetime ISA?

Lifetime Individual Savings Accounts (ISAs) are intended to be a method of saving money tax-free on a long-term basis. They can be used for saving for later life or to buy your first home.

You can open one if you are over 18 and under 40. Once you have opened your Lifetime ISA, you can put up to £4,000 into it until you are 50. The government adds a 25% bonus to your savings, up to a maximum of £1,000 per tax year.

The £4,000 you can put into a Lifetime ISA is part of your annual ISA limit of £20,000 (for tax year 2018/19) – it isn’t additional to that annual ISA limit.

You can hold cash, stocks and shares, or a combination of both in your Lifetime ISA.

If you withdraw cash or assets from your Lifetime ISA, you will be charged 25%. There are a few exceptions to this charge, which are:

  • If you are buying your first home
  • If you are aged 60 or over
  • If you are terminally ill, with less than 12 months to live.

Once you turn 50, you will no longer be able to pay into your Lifetime ISA or earn the 25% bonus but your ISA account will stay open and you will still earn interest or investment returns.

To be able to open a Lifetime ISA, you must be a UK resident unless you are a Crown employee working overseas, or their spouse or civil partner.

How do you use your Lifetime ISA to buy your first home?

You are allowed to use your Lifetime ISA to buy your first home if all of the following apply:

  • You are buying with a mortgage
  • The property costs £450,000 or less
  • You have had the Lifetime ISA for at least 12 months before buying the property
  • You are using a conveyancer or solicitor to act on your behalf in the purchase – the ISA provider will pay the money directly to them, not to you.

If you are buying the home with someone else who also has a Lifetime ISA, you can also use their savings and government bonds in the purchase too. If they already have a property or a legal interest in one (such as one held in a trust that they are a beneficiary of), they will have to pay a 25% withdrawal.

If you have a Lifetime ISA and a Help to Buy ISA, you can only use the government bond from one of them to purchase your first home, not from both. You are allowed to transfer money from a Help to Buy ISA to a Lifetime ISA, but if you transfer the other way around, from a Lifetime ISA to a Help to Buy ISA you will have to pay the 25% withdrawal charge.

How can you use your Lifetime ISA to save for later life?

If you are aged 60 or over, you are allowed to take money out of your Lifetime ISA without having to pay the 25% charge. If you withdraw or transfer the money before you are 60, you will have to pay the 25% charge though.

If you die, the Lifetime ISA ends on the date of your death. There would be no charge to withdraw funds or assets from your Lifetime ISA in that instance.

How can DSR Tax Claims help?

Although we can’t help you with your Lifetime ISA, we aim to make life as simple as possible for our clients and that includes giving you the information you need to make your taxes (and your life) simpler and less stressful.  Our team of experts at DSR Tax Claims are always on hand to help our clients and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax rebate. We can even take care of all that paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.

This page was last updated on 26/10/2018.

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