Lifetime ISA
IntermediateA Lifetime ISA is a type of Individual Savings Account in the United Kingdom, for people aged 18 to 39 when opening it, that adds a government bonus to contributions and is intended for buying a first home or saving for later life.
Savers can pay in up to an annual limit, and the government adds a bonus of 25% of each contribution. Contributions can continue until age 50, and the money grows free of tax, like other ISAs.
The money can be withdrawn without penalty to buy a first home, within a price limit, or from age 60 for any purpose. For example, a saver who pays in 4,000 in a year would receive a bonus of 1,000, taking the total to 5,000 before any investment growth.
Withdrawals for any other reason, except terminal illness, face a 25% charge on the amount withdrawn. Because this charge applies to the total including the bonus, the saver gets back less than they paid in. For example, withdrawing 5,000 would incur a charge of 1,250, leaving 3,750, which is 250 less than the original 4,000 contributed.
Lifetime ISAs can suit young people saving for a first home, but the property price limit and withdrawal charge mean they are not right for everyone. The rules have been reviewed by the government, so current terms should be checked.
For worked examples and full lessons, visit notesbysara.org.