The Lifetime ISA is a type of Individual Savings Account (ISA), designed to help you buy your first home or save towards your retirement.
Saving into a Lifetime ISA
If you are aged 18 to 39, you can open a Lifetime ISA and save up to £4,000 (your annual Lifetime ISA allowance) tax-free each year up to and including the day before your 50th birthday. The government will pay a 25% bonus on your contributions, up to a maximum of £1,000 a year.
The 25% government bonus in the 2017/18 tax year will be paid after the tax year has ended. The government has indicated the bonus will be paid within 28 days of 6 April 2018, and you’ll start earning interest on the bonus from the date we receive it from HMRC.
From 2018/19 tax year the government will pay the bonus monthly, based on the contributions you have made each month. This will take four to nine weeks to be paid into your account.
Your Lifetime ISA allowance forms part of your overall £20,000 annual ISA allowance. If you put the full £4,000 allowance into a Lifetime ISA, you would have £16,000 of your allowance remaining to save in a Cash ISA, Stocks & Shares ISA and/or Innovative Finance ISA.
Unless you’re using them towards buying a first home, you'll not be able to access your Lifetime ISA savings until you turn 60, without incurring a 25% government withdrawal charge (unless you are diagnosed with a terminal illness)
Using your Lifetime ISA - First Time Buyers
After the first 12 months of opening your account you can use some or all of the money built up in your Lifetime ISA to help buy your first home. The property must be in the UK, purchased with a mortgage as your main residence and be valued at no more than £450,000.
If you're buying with someone else, you can both potentially use a Lifetime ISA if you are both first time buyers.
You can transfer in any funds you build up in a Help to Buy ISA up to 5 April 2017 but you can only do this once without affecting your Lifetime ISA allowance. Subsequent transfers, or transfers of funds or interest added to a Help to Buy ISA after 5 April 2017, will count towards your £4,000 annual Lifetime ISA allowance.
You can continue saving into both a Help to Buy ISA and Lifetime ISA, but you can only use the bonus from either your Lifetime ISA or Help to Buy ISA to buy your first home.