Is a Lifetime ISA right for me?

A Lifetime ISA (Lifetime Individual Savings Account or LISA for short) is a tax-efficient savings account with the purpose of helping people buy their first property or save for retirement. 

You can save up to £4,000 each tax year and get a 25% bonus from the government added on top of what you save. If you save the maximum of £4,000, you could get up to £1,000 for free each tax year. 

This £4,000 is part of your £20,000 annual ISA allowance, so if you use the full £4,000, you’ll only be able to save £16,000 across your other individual savings accounts. 

What to consider before opening a Lifetime ISA:

  1. You must be a first-time buyer, which means you’ve never owned property anywhere in the world before. Also, if for example a family member added your name to the deed to their home, you wouldn’t be able to use a Lifetime ISA to buy your house. 
  1. You also have to buy a property that you intend to live in and the price of the property can’t exceed £450,000. 
  1. You’ll pay a penalty if you withdraw the money from a Lifetime ISA and don’t use it for your first property. An alternative is to keep the money for retirement, but you wouldn’t be able to access the money until the age of 60. If you’re a higher rate taxpayer, it’s better to use your pension to save for retirement rather than a Lifetime ISA.
  1. Anyone between the age of 18 and 39 can open a Lifetime ISA. You can continue contributing to your Lifetime ISA until the age of 50.
  1. You need to open and hold a Lifetime ISA for at least 12 months before you can access the money for your first property. So if you’re planning to buy in the next year, it’s not a good option for you.

There are two different accounts to choose from. You can open a Lifetime Cash ISA or a Lifetime Stocks and Shares ISA. With the Lifetime Cash ISA, you can earn interest tax-free. This is the best option if you plan to buy property within the next 5 years. You can also open a Lifetime Stocks and Shares ISA and earn capital gains and dividends tax-free. This is a good option if you plan to buy property with more than a 5 year timeframe.

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Octopus Money Limited is an appointed representative of Octopus Investments Limited which is authorised and regulated in the UK by the Financial Conduct Authority. Registered office: 33 Holborn, London EC1N 2HT. Registered in England & Wales under No. 14069098.

Octopus Money is a trading name of TW11 Wealth Management Limited. Registered in England and Wales (No. 10339119). Authorised and regulated by the Financial Conduct Authority. Our Financial Services Register number is 763630.

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