If you’re looking to buy your first home or boost your retirement savings, then a Lifetime ISA (LISA) could be a great option for you. A Lifetime ISA is designed to help first-time buyers save for a property while also supporting long-term financial security, a Lifetime ISA (LISA) offers a 25% government bonus on contributions, making it a valuable savings tool.
A Lifetime ISA (LISA) can be opened if you are between the ages of 18 and 39 and can be held until age 50. You can choose between a Cash LISA, which earns interest, or a Stocks and Shares LISA, which invests your savings. Whichever option you choose, the government boosts your contributions with a 25% bonus, helping you grow your savings faster.
What is a Lifetime ISA?
A Lifetime ISA (LISA) is a tax-free savings account designed to help first-time buyers save for a home or build a retirement fund. Open to those aged 18 to 39, it allows savings of up to £4,000 per tax year, with a 25% government bonus added. The funds can be used to buy a first home (up to £450,000) or withdrawn penalty-free from age 60 for retirement.
How much bonus does the government pay on a Lifetime ISA?
The government adds a 25% bonus to your contributions, up to a maximum of £1,000 per year. This bonus is paid monthly based on the contributions made in the previous month. For example, if you contribute £100 in June, a 25% bonus of £25 will be added to your Lifetime ISA in July. You can use your savings towards purchasing your first home after at least 12 months of saving, as long as the home is valued up to £450,000. If you’re buying jointly, both buyers can have their own LISAs, allowing you both to receive the bonus.
If you don’t use the funds for a home purchase after 12 months, you can keep the money and the bonuses in the account and use it for retirement savings. However, if you decide to withdraw it for any other reason, you’ll face a 25% withdrawal penalty, meaning you’ll lose the government bonus and could end up with less than you originally invested.
What happens to my Lifetime ISA if I haven’t saved for the minimum period of 12 months?
If you’ve saved for less than 12 months, you won’t be able to use your Lifetime ISA savings for a home purchase. The 12-month minimum saving period is a requirement to access the funds for a first home. Attempting to withdraw the funds before reaching the 12-month mark for a home purchase will result in a penalty, and you could lose the government bonus and part of your own savings.
After you have withdrawn your savings, including bonuses, to fund or part-fund the purchase of your first home, you can keep the Lifetime ISA and continue to invest for your retirement. Continuing to invest will still attract the government bonus of 25%.
How can I use my Lifetime ISA for retirement
Whether you have used your LISA for the purchase of your first home or not, any funds remaining in your Lifetime ISA can be kept and added to as part of your retirement savings. Any further contributions you make will continue to attract the 25% government bonus. You can continue to contribute to your LISA until you reach age 50. However, to use these funds for retirement, they must remain in the Lifetime ISA until you reach age 60. Withdrawing funds before age 60 for any reason other than buying your first home would result in a 25% penalty.”
Do I need a solicitor to use my Lifetime ISA (LISA)?
You do not need a solicitor to open or manage your Lifetime ISA (LISA). However, if you are using the funds for the purchase of your first home, you will need a solicitor or conveyancer to handle the legal aspects of the transaction. They will help ensure the LISA funds are correctly applied towards the purchase and ensure all requirements are met for you to receive the government bonus.
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How to use your Lifetime ISA when buying your first home
When purchasing your new home, you will need the aid of a solicitor to claim this incentive on your behalf. Our residential conveyancing solicitors here at Thornton Jones can assist you with using your Lifetime ISA (LISA), and advise you on the rules and timeframe in which they must be used.
No, the Lifetime ISA is specifically for first-time buyers. If you already own or have previously owned a property, you won’t be eligible to use it for a home purchase.
If you don’t use your LISA for a first home, you can keep saving in it until you turn 60, at which point you can withdraw your money (including the government bonus) without penalty.
Yes, you can have both, but you can only use the government bonus from one of them when buying your first home. A Lifetime ISA may offer a higher savings limit and bonus.
You must have opened and held your LISA for at least 12 months before you can use it towards a home purchase.
If your property purchase doesn’t go ahead, the money must be returned to your LISA to avoid the 25% withdrawal penalty.
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