Branch finder

Lifetime ISA

What is a Lifetime ISA?

The Lifetime ISA, which was announced in the 2016 Budget, is a new type of Individual Savings Account (ISA) designed to help you save for a new home and your retirement at the same time.

From 6 April 2017, if you are aged between 18 and 39, you'll be able to open a Lifetime ISA.

The government is collaborating with the financial industry to establish exactly how the Lifetime ISA will work in practice. This is what has been announced so far but could be subject to change.

Lifetime ISA overview

  • You can save up to £4,000 tax-free in each year
  • The government bonus is worth 25% of your contribution, up to £1,000 a year
  • Your 25% bonus is paid at the end of each tax year on savings put in before your 50th birthday
  • You can use some or all of the money to buy your first home; or
  • You can keep it until you're 60 to help fund your retirement

Save for your first home

  • After the first 12 months, you can use 100% of your balance and bonus towards a deposit on your first house in the UK worth up to £450,000
  • If you're buying as a couple, both of you can have a LISA and each receive the bonus
  • You can transfer a Help to Buy ISA balance into a Lifetime ISA during the 2017/2018 tax year; or
  • You can continue saving into both, though you can only use the bonus from one to buy a house

Save for your retirement

  • After your 60th birthday you can take out all or part of your LISA savings tax-free
  • You can withdraw the money at any time before you turn 60, though you'll lose the bonus and pay a 5% charge
  • Any money you keep in the Lifetime ISA after you turn 60 will continue to earn interest tax-free

Frequently asked questions

The total amount you can save each year into your ISAs will be increased from £15,240 to £20,000. The rise in the ISA allowance takes effect in April 2017, at the same time you can open a Lifetime ISA. For example, if you save the maximum of £4,000 into a Lifetime ISA, you would still have £16,000 left of your ISA allowance.

You're only allowed to have one Lifetime ISA a year. However, during the same financial year you're also entitled to pay into one Cash ISA, one Stocks and Shares ISA and an Innovative Finance (peer-to-peer) ISA, up to a total of £20,000 and don't forget you can also keep your Help to Buy ISA, which is a Cash ISA.

ISA interest doesn't count towards your Personal Savings Allowance - it's already tax-free - so your Lifetime ISA won't count either.

We'll update the information on this page when the government has confirmed more details. For now, you can still save £15,240 into ISAs in the current 2016/2017 tax year. Find our more on our ISA Range page.

Version Info: