Lifetime ISA

The Lifetime ISA is a new 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'll be able to open a Lifetime ISA (LISA) and save up to £4,000 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 based on the contributions you have made each month. This will take four to nine weeks to be paid.
 
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. 
Open Lifetime ISA aged 18 to 39. Pay in up to £4,000 each year until your 50th birthday and receive a 25% government bonus

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 use your Lifetime ISA to buy a first home up to £450,000

You can transfer in any funds you have built up in a Help to Buy ISA up to 5 April 2017 but you can only do this once without affecting your LISA 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.

Using your Lifetime ISA - To help fund your retirement

You can also use your Lifetime ISA to help fund your retirement and access your funds without a withdrawal charge from the age of 60.  Any money you keep in the Lifetime ISA after you turn 60 will continue to earn interest tax-free.

Once you reach your 50th birthday, you'll no longer be able to pay into a Lifetime ISA or receive the government bonus. However, your Lifetime ISA savings will still earn interest, or investment returns if you have a Stocks & Shares Lifetime 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 charge (unless you are diagnosed with a terminal illness). 


If you are employed, you should consider the potential availability of a workplace pension scheme through an employer, which provides employer-matched contributions, and your tax position.

You can access money in your Lifetime ISA from age 60 to help fund your retirement
If you save in a Lifetime ISA instead of enrolling in, or contributing to, a pension scheme from your employer or personal pension scheme:
  • you may lose the benefit of contributions by an employer (if any) to that scheme; and
  • your current or future entitlement to means tested benefits may be affected (these depend on the amount of income and capital you have, which includes savings).

Please be aware that the information we have provided is not advice. If you’re considering varying your existing pension arrangements as part of a decision to invest in a Lifetime ISA, you should seek independent financial advice before making any changes. If you don’t fully understand the pension and tax rules when making changes, you may not optimise your retirement savings and may face an income shortfall in retirement

A 25% charge applies if you take money out of a Lifetime ISA before age 60 unless buying a first home - you will get back less than you paid in

How does the withdrawal charge affect my savings?

If you withdraw funds from your Lifetime ISA for anything other than buying your first home or towards your retirement at the age of 60, a 25% government withdrawal charge will usually apply. This means you would get back less than you paid in. 

For example, if you want to withdraw £5,000 from your Lifetime ISA – your full annual Lifetime ISA allowance of £4,000 plus the government bonus of £1,000 – you would receive £3,750. You would have made an overall loss of £250 on the amount you paid in. (For the purposes of this example, we have not included interest.)


The 25% government withdrawal charge will not apply to withdrawals if you have been diagnosed with a terminal illness, nor upon death. 

While you can close your Lifetime ISA during the 2017/18 tax year without a withdrawal charge, you won’t receive any government bonus. After April 2018, your 25% bonus will be paid monthly on savings deposited before your 50th birthday. This will be paid by HMRC within 4-9 weeks.


Ready to apply?

View full product details of our Lifetime ISA and apply online now

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If you want to open a Skipton Online Cash Lifetime ISA, it is important that you read the product literature including the key features and terms and conditions carefully. These contain the details of your agreement with us for this account and we rely on them for our relationship with you.

LISA: Your questions answered

You're only allowed to have one Lifetime ISA in each tax year, and you can pay in a maximum of £4,000 per tax year up to and including the day before your 50th birthday.. During the same year you can also have one Cash ISA, one Stocks & Shares ISA and an Innovative Finance (peer-to-peer) ISA. The combined total of your ISA savings must not exceed the annual ISA allowance of £20,000 in 2017/2018. 

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 can also keep your Help to Buy ISA, or transfer it into a Lifetime ISA.

The table below summarises how you can transfer funds into a Lifetime ISA:

Can I transfer into LISA from Details
ISA Yes Yes but it will form part of your current year's LISA allowance.
Help to Buy ISA Yes Yes, in the 2017/2018 tax year, the first transfer of money saved up to 5 April 2017 additional funds to the £4,000 LISA allowance.
Subsequent transfers in the 2017/2018 tax year, transfers made from Help to Buy funds added after 5 April 2017, and any transfers made from the 2018/2019 tax year onwards, will count as part of the £4,000 LISA allowance.
Another LISA (Cash) Yes Yes, there is no government charge to do this and your annual LISA allowance is not affected.
Another LISA (Stocks & Shares) Yes Yes, there is no government charge to do this and your annual LISA allowance is not affected.
If you transfer funds from a previous year’s ISA of a different type, these count towards your £4,000 Lifetime ISA allowance but not your £20,000 annual ISA allowance. Money transferred from a current year’s ISA will be treated as part of your £20,000 allowance. 

You can transfer your Lifetime ISA into another Lifetime ISA without the government withdrawal charge.

If you transfer out of your Lifetime ISA into a different type of ISA (Cash ISA, Stocks & Shares ISA or an Innovative Finance ISA) after the 2017/18 tax year, the transfer will be subject to the 25% government withdrawal charge. This means you’ll get back less than you paid in. 

During the 2017/18 tax year, you can transfer your LISA to a different type of ISA without having to pay the government withdrawal charge, but you won’t receive the government bonus either. 

You can’t open a Lifetime ISA on someone else’s behalf, but if your child or grandchild has a Lifetime ISA you can gift money for them to pay into it. If you gifted £3,000 the government bonus would be £750. You can make gifts of up to £3,000 in total each tax year without them being added to the value of your estate for Inheritance Tax purposes. If you are considering making gifts, it is recommended that you take financial advice if the value of your estate exceeds £325,000.
If you have a Help to Buy ISA, you can make a single transfer of any funds you had built up in it as of 5 April 2017 into a Lifetime ISA by the end of the tax year (5 April 2018) without it counting towards your £4,000 annual Lifetime ISA limit. Subsequent transfers will count towards your annual LISA allowance.

You can transfer anything you’ve paid into, and any interest added to, a Help to Buy ISA during the 2017/18 tax year into a Lifetime ISA, but this will count towards your annual Lifetime ISA allowance. 

You will also be able to transfer funds from a Help to Buy ISA after 5 April 2018, but this will also count towards your annual Lifetime ISA allowance.

The table below illustrates the difference between a Lifetime ISA and a Help to Buy ISA:

  Lifetime ISA Help to Buy ISA
How much can you save per year? £4,000 £2,400 (£3,400 in year one)
Payment restrictions? None £200 per month
Maximum bonus? £32,000 (over 32 years) assuming a maximum contribution £3,000
Bonus paid? Annually for 2017/18 tax year and monthly from 2018/19. When you buy a home
Maximum property price? £450,000 £250,000 (£450,000 in London)
Minimum period to hold account? LISA has to be open 12 months before a first house purchase withdrawal can be made At least £1,600 saved
Who can open it? Anyone aged 18 to 39 First-time buyer aged 16+
When is money paid out? Funds available for exchange of contracts Funds available upon completion
When you come to buy you will need to tell your conveyancer you want to use your LISA and provide them with a declaration. They’ll also have to provide us with a declaration. When we receive this paperwork, the amount you request is paid directly to the conveyancer within 30 days without applying the government withdrawal charge.
If your partner has previously owned property either through buying a house, or having a part share in a property for example, they wouldn’t be able to use their Lifetime ISA for this without paying the government withdrawal charge. They could still make a withdrawal but would have to pay the 25% charge.
You can close your Lifetime ISA during the 2017/2018 tax year and there will be no government bonus or withdrawal charge. 

In subsequent years, you can cancel your Lifetime ISA within 30 days of taking it out without incurring a government charge. If you opened a cash Lifetime ISA then you will get back the full amount you have paid in. If you opened an stocks and shares Lifetime ISA, you may get back less than you paid in due to market movements. 

After the 2017/18 tax year, apart from a first home purchase or to help fund your retirement once you reach age 60,  withdrawals can be made at any time but will normally incur a 25% government early withdrawal charge. This means you would get back less than you paid in. 

Please see the section - How does the withdrawal charge affect my savings?

The 25% government withdrawal charge will not apply to withdrawals if you are terminally ill or upon death, or to account closures made during the 2017/18 tax year only. Withdrawn funds cannot be replaced.

If you close your Lifetime ISA after you reach age 40 you will not be able to open a new one. If you intend to use funds for house purchase or to save towards retirement, you may wish to leave a small amount in the account so you can continue to use it in future.  You have the option to contribute for a further 10 years and gain a bonus of up to £10,000 if you pay in your full allowance each year.

Some ISAs are flexible, which means you can withdraw and pay back in throughout the tax year without affecting your overall annual ISA allowance. However, Lifetime ISAs are not flexible, so it will not be possible for withdrawals to be made and replaced without affecting your annual LISA allowance. 
Yes, but you can only open one Lifetime ISA in each tax year and the maximum amount you can pay into Lifetime ISAs each year is your Lifetime ISA allowance, which is £4,000 in the 2017/2018 tax year.
 
You can transfer from a Stocks and Shares Lifetime ISA to a Cash Lifetime ISA without incurring the 25% withdrawal charge. To do this, you will need to visit our Transferring your ISA page or ask for a transfer form in your local branch. 
 
For more Lifetime ISA information visit lifetimeisa.campaign.gov.uk or call the personal tax helpline – 0300 200 3312. The helpline is open from 8.00am to 8.00pm Monday to Friday; and 8.00am to 4.00pm on Saturdays and Bank Holidays.
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