What is a Lifetime ISA?

A Lifetime ISA (Individual Savings Account) is a type of savings account designed to help perspective homeowners save for their first home or other individuals thinking about their retirement plans. It was introduced by the Government in 2017 offering a tax-free avenue to save with potential added bonuses.

Key Features

• Eligibility: You must be between 18 and 39 years old to open a Lifetime ISA.
• Contributions: You can save up to £4,000 each tax year.
• Government Bonus: The government adds a 25% bonus to your savings, up to a maximum of £1,000 per year.
• Tax-Free Growth: Any interest or investment growth is tax-free.

What can you use your Lifetime ISA for?

1. Buying Your First Home: You can use your savings to buy your first home, valued up to £450,000. The account must be open for at least 12 months before you can make a withdrawal for this purpose.
2. Retirement Savings: If you’re not using it for a home, you can keep saving until you’re 60. After that, you can withdraw the money tax-free when you retire.

Important Considerations

Before opening a Lifetime ISA, it is crucial to be fully aware of the finer details when assessing if this ISA is the right fit for your financial goals.

• Withdrawal Penalty: If you withdraw funds for reasons other than buying your first home or after age 60 for retirement, you’ll face a 25% charge. This means you could get back less than you put in.
• Investment Options: Lifetime ISAs can be cash-based or stocks and shares-based, allowing you to choose how your money grows, however it is important to consider the risks when investing.

Is a Lifetime ISA Right for You?

A Lifetime ISA is a great option if you’re planning to buy your first home or want to boost your retirement savings. However, it is crucial to consider your financial goals, your desired timelines and the potential penalties before committing.

In summary, a Lifetime ISA offers a unique way to save with government support, making it a valuable tool for achieving major life goals.

Are you ready to unlock the potential held within a Lifetime ISA? We can help you navigate the process and stay in control of your property purchase.

Let’s start your journey together!

An ISA is a medium to long term investment, which aims to increase the value of the money you invest for growth or income or both. The value of your investments and any income from them can fall as well as rise. You may not get back the amount you invested.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

Approved by The Openwork Partnership on 24.10.2024

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