- On July 8, 2017
The new tax year is bringing with it a new ISA product designed to give a boost to first-time buyers and retirement savers.
Here’s the low-down on the Lifetime ISA (LISA) – a tax-efficient savings vehicle that attracts a generous Government bonus.
The first thing you need to know is that you’ll need to be over 18 and under 40 (on April 6) to be eligible to sign up.
If you are then you can invest up to £4,000 a year until the age of 50 and take advantage of a 25% boost to your savings from the Government.
This means that if you pay in the maximum amount for all the eligible years you could be in for a windfall of £32,000 tax-free with interest on top.
LISAs are aimed primarily at first-time buyers, but also at savers who are looking to boost their retirement income.
First-time buyers must use the money to purchase a UK-based property worth less than £450,000 for themselves. It must be bought with a mortgage and the buyer can’t have owned any part of a property before, even through inheritance. The money can’t be used for a buy-to-let investment.
Retirement savers can’t touch their money until they turn 60 otherwise they face losing the bonus and having to pay an additional 5% penalty. After this age, however, they can withdraw their cash free from tax.
To open a LISA head to your local bank or building society and fill out a few forms. It’s designed to be as simple as setting up a traditional ISA account.
And don’t forget the annual allowance into a traditional ISA is increasing from £15,240 to £20,000 from April offering a further boost to savers.
The £4,000 LISA limit is part of this so you’ll be left with £16,000 to play with if you pay in the full amount eligible for the bonus.
You can also transfer your LISA between providers just like a traditional ISA to ensure you’re getting the best rate of interest. So shop around on a regular basis.
The LISA is subject to the same inheritance tax rules as other products in the ISA stable; the fund forms part of the account holder’s estate and a surviving spouse or civil partner can inherit the ISA tax advantage.
For a free consultation about your financial needs call 0118 974 0159 or email firstname.lastname@example.org.