The lowdown on Lifetime ISAs

by Leeds Building Society

The lowdown on Lifetime ISAs

Earlier this year, George Osborne delivered his 8th Budget announcement. From freezing fuel duty to a new tax on sugary drinks, the announcement brought with it a fair few changes. One of these is the introduction of the Lifetime ISA.

The Lifetime ISA is the new kid on the block in the world of savings, and will be making its debut in April 2017. The Government has given a sneak peek as to what the Lifetime ISA might look like, and here’s what you need to know:

An added bonus

The Lifetime ISA will allow you to save up to £4,000 each year and receive a bonus from the government of 25% on any savings you put in (that’s up to £1,000 a year). The savings and the bonus can either be used towards a deposit on your first home or saved until you reach retirement. If you open a Lifetime ISA between the ages of 18 and 40 you’ll receive the 25% bonus on any savings you put in every year up to the age of 50.

Choose how much you want to save each month

You can save as little or as much on a monthly basis as you like, as long as you don’t save any more than £4,000 a year.

Helping you to make that move

You can use your savings and bonus towards a deposit on your first home (worth up to £450,000). If you have a Help to Buy ISA, you’ll be able to transfer these savings into the Lifetime ISA when it’s available (but you’ll only be able to use the bonus from one of these accounts to buy a house).

Save for your retirement

You can withdraw money from your Lifetime ISA at any time before you are 60, but you’ll have to pay a 5% charge and will lose the government bonus and any interest on it. After you turn 60, you can take out all of your savings tax-free – which might just come in handy for those retirement plans.

April 2017 is looking like the month to watch in the savings world. Not only is the Lifetime ISA being introduced, but the total amount you’ll be able to save into an ISA will be increasing from £15,240 to £20,000 too.

For more information about the Lifetime ISA and the 2016 Budget announcement, head to www.gov.uk.

This article contains public sector information licensed under the Open Government Licence v3.0 www.nationalarchives.gov.uk/doc/open-government-licence/version/3/.

This guide is intended as a summary only, the Government has yet not confirmed the final details of the Lifetime ISA and this guide does not constitute legal or financial advice given by Leeds Building Society. No reliance should be placed on this guide and you must make your own decisions, we recommend that you seek independent advice if you have any questions or queries.

Leeds Building Society only offers Cash ISAs. Cash ISAs are available to individuals aged 16 and over who are resident in the UK for tax purposes.