With the costs involved in buying your own property, there are plenty of products available to help you get on the housing ladder, one of these being the Lifetime ISA (LISA). It is a tax-free savings or investments account designed to help those aged 18-39 buy their first home or save for retirement.
If you are renting a home and want to start saving, then the LISA is definitely worth taking a look at, have a look below to see if you are eligible and if it might be the option for you!
How does a lifetime Isa work?
When is it available? It's been available since 6 April 2017
Who can open a lifetime Isa? Adults aged 18-39, although only first-time buyers can use one to buy property under age 60.
What do I get? For every £4 you save, the government will add £1 (worth up to £1,000 every tax year until you turn 50 years old).
How much can I save? Up to £4,000 a year is eligible for the 25% bonus (you can add more but it won’t receive a government contribution).
When is the bonus paid? From the 2018/19 tax year onwards the bonus is paid every month, so that you benefit from compound growth.
Can I invest in stocks and shares? Yes, you can invest in either cash or stocks and shares.
Does this sit within my overall Isa limit? Yes, your overall annual Isa limit will be £20,000 in 2018/19 and will include any payments into a cash Isa, stocks and shares Isa, innovative finance Isa, or lifetime Isa.
Can I spend the money on whatever I like? Under the age of 60 – no, you must use the cash to purchase a first property worth up to £450,000. After age 60 – yes, you can spend the money as you see fit.
Are withdrawals tax-free? Yes, as with other Isas, withdrawals are tax-free.
Are withdrawals penalty-free? It depends – if you use the money to purchase a first property, or withdraw after the age of 60, you won’t be penalised. If you want to spend the money on anything other than your first property and you’re under the age of 60, you’ll be hit with a 25% penalty when you withdraw your cash.
Can I pass on my lifetime Isa to a partner? Yes, your spouse or civil partner can inherit the value of your lifetime Isa as an ‘additional permitted subscription’ (APS) allowance. For more on how to pass on an Isa, see our guide to inheritance Isas.