What is a lifetime ISA?
A lifetime ISA is an ISA that comes with a government bonus to help you save either for your first home or for retirement. But you must be aware of the lifetime ISA rules before opening one!
You might have seen lifetime ISAs on TV programmes such as 'Location, Location, Location', where they're described as a 'first-time buyers scheme'.
Why use a lifetime ISA to save for your first home deposit?
- You'll get a 25% bonus on everything you save in your lifetime ISA. So, for every £100 you pay in, the government pays in another £25. As you can invest up to £4,000 each tax year, you could earn up to an extra £1,000 bonus money each year.
- As well as the bonus, you could also grow your money by getting investment returns if you open a stocks and shares lifetime ISA, or interest if you open a cash lifetime ISA*.
- Lifetime ISAs are tax-exempt, which means when it's time to withdraw your money you won't pay any Income Tax or Capital Gains Tax.
*Stocks and shares ISAs tend to have more potential to out-grow inflation over the long term than interest-only accounts do.
Find out about the differences between cash and stocks and shares lifetime ISAs.
The lifetime ISA rules
- You must be aged between 18 and 39 to open a lifetime ISA. You can pay money in until you turn 50.
- The home you buy with your lifetime ISA must cost no more than £450,000, you must intend to live in it and you must buy it with a mortgage.
- You can invest up to £4,000 in a lifetime ISA each tax year. But if you're paying into another type of ISA as well, be aware that the total amount you can pay into ISAs is £20,000 each tax year (tax year runs April to April).
- If you take money out for anything other than buying your first home (through a conveyancing solicitor), the government will charge you 25% of everything you take out - which will be more than the bonus it paid in. But after you turn 60, you can take money out for anything you like without being charged.
- Your lifetime ISA must be open, with money in it, for at least a year before you use it to buy your first home, otherwise you'll be charged the 25% government withdrawal charge.
- You can transfer to a OneFamily Lifetime ISA from a cash ISA, stocks and shares ISA, or matured Child Trust Fund - so long as the value is £4,000 or less. The same applies to anyone under 40 with a Help to Buy ISA.
Lifetime ISA eligibility
To open a lifetime ISA you must be:
- a UK resident
- aged between 18 and 39 (inclusive)
Once opened, you can keep paying into your lifetime ISA until you turn 50.
You can transfer a lifetime ISA that you hold with another provider to OneFamily. Find out about transferring your lifetime ISA.
Watch our Lifetime ISA video
Find out how you could get a £1,000 government bonus towards your first home or retirement with the OneFamily Stocks and Shares Lifetime ISA.
How to use a lifetime ISA for first-time buyers
When you buy your first home, you'll need to ask your conveyancing solicitor to take money out of your lifetime ISA to put towards your deposit. There are few important points to consider:
Find out more about using your lifetime ISA to buy your first home.
How to use a lifetime ISA for retirement
After your 60th birthday you can withdraw money from your lifetime ISA, tax-free and without paying any withdrawal charges. Tax advantages depend on your individual circumstances and could change in the future.
Find out more about your options to save for retirement.
Open a lifetime ISA with OneFamily
Find out more about our Lifetime ISA, which invests in stocks and shares, and open your account here:
Looking for more information on our Lifetime ISAs?
Read our lifetime ISA FAQs or use our lifetime ISA calculator to see how your investments could grow over time.
