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The Lifetime ISA

Published on 10 September 2018 | Modified on 15 December 2022

Written by Stacey Bennett

The Lifetime ISA (LISA) is a tax-free wrapper that lets you put up to £4,000 in it every year.  It can be as cash savings, so you get interest on it, or stocks and shares investing so you get a share growth (or loss).

How does it work?

The LISA is designed for two specific purposes. The first is for first-time buyers to use towards a deposit for a residential property. The second is for later life savings once you hit the age of 60. If you decide to use the LISA to buy your first home, you can keep it open and save for retirement. The idea behind mixing the two is a bit of behavioural economics.

  • You can save up to £4,000 a year in a LISA as a lump sum or by putting in the cash when you can – the state will then add a 25% bonus on top up to a maximum of £1,000 per year.
  • The bonus is paid every year until you hit the age of 50.
  • The max bonus is £33,000 if you open it at 18 and contribute to it until you are 50.

Do I qualify for a Lifetime ISA (life savings)?

To qualify for a Lifetime ISA (savings) you must:

  • Be aged between 18 to 39
  • If you’re nearing 40, make sure you open one before you hit the cut off age. Once you’re over 40, you can continue to save into the LISA until the day before your 50th

Do I qualify for a Lifetime ISA (first time buyers)?

To qualify for a Lifetime ISA (first time buyer):

  • You must not have owned any property before – whether inside or outside the UK. This includes owning a property (or a share of one) you inherited even if it was sold straightaway.
  • If you owned a company or had a trust that owned a residential property, you are also not considered a first time buyer.
  • To qualify for the bonus, you will need to buy a property for £450,000 or less.
  • You need to buy with a mortgage.

What can the bonus be used for – First Time Buyers

You need to have had the LISA open for at least 12 months to be able to use it (and the bonus) towards your first home. If you haven’t started a LISA and you need to buy within a year, you should consider a Help to Buy ISA instead. If you are buying with a partner, you need to open separate accounts.

What can the bonus be used for – Savings

  • You can only access your LISA funds at the age of 60 – if you wanted to access the funds before 60, there is a 25% penalty.
  • You can access the cash on or after your 60th birthday then use it for whatever you like.
  • You do not have to use it all at once, you can make partial withdrawals and if you leave it in the LISA it will continue to get interest.
  • You don’t pay tax on the cash.

For more information on Lifetime ISA’s or buying and selling of property, please visit the following  websites:-

If you are considering buying a new build home – give our team a call on 01270 625478. See our Residential Conveyancing service or complete this form for a call back.

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