Introducing the new Lifetime ISA
From April 2017, any adult under the age of 40 will be able to open a Lifetime ISA account, into which they can deposit up to £4,000 each tax year. They will then receive a 25% bonus from the government on any savings put into the account before their 50th birthday.
Both the tax-free savings and the government bonus can be used for a deposit for a first home in the UK worth up to £450,000 at any time from 12 months after first saving into the account. Alternatively the funds, including the bonus, may be withdrawn from the Lifetime ISA from age 60 tax free, for any purpose. Lifetime ISA holders can access their savings if they become terminally ill.
Savers can also withdraw money before their 60th birthday for other purposes but a 25% government charge will be applied to the amount of the withdrawal, together with a “small additional charge”.
New amounts contributed to a Lifetime ISA will count against an individual’s overall ISA limit for the year (£20,000 from April 2017), as well as the Lifetime ISA limit. An individual will only be able to pay into one Lifetime ISA each tax year, as well as a Cash ISA, a Stocks and Shares ISA and an Innovative ISA.