Lifetime ISA FAQs

We take a look at the Lifetime ISA and answer your most frequently asked questions.

Got a question about Lifetime ISAs? We've answered all of your most frequently asked questions below; just click the relevant link to find the answers you need.

General Lifetime ISA information

What is a Lifetime ISA?

Lifetime ISAs (LISA) are Individual Savings Accounts that were set up by the government in April 2017 to help young people save for their first home or prepare for retirement. In the current tax year you can save up to £4,000 into a Lifetime ISA, which is included in the annual ISA subscription limit of £20,000.

There are two types of Lifetime ISA: Cash Lifetime ISA and Stocks and Shares Lifetime ISA. Cash Lifetime ISAs are more stable but provide very low rates of interest. Stocks and Shares Lifetime ISAs, on the other hand, can provide much greater returns but carry a greater risk of losing money.

For all the money subscribed into your Lifetime ISA, whether it's Cash or Stocks and Shares, the government will give you a 25% bonus on the money you have subscribed, up to a maximum of £1,000 per tax year.

What is the Lifetime ISA annual allowance?

There is an annual allowance on how much can be invested in a Lifetime ISA each tax year. This tax year, the annual ISA allowance is £20,000, £4,000 of which can be invested in a Lifetime ISA.

Who can have a Lifetime ISA?

You can open a Lifetime ISA with an authorised provider as long as you are:

  • A UK resident or Crown servant (or spouse/civil partner of one)
  • Aged between 18 and 39 years old

You can continue subscribing into your Lifetime ISA until the day before your 50th birthday. So the younger you are when you start, the more you can save.

What can I use it for?

Lifetime ISAs can be used by first-time buyers towards your first home or as longer-term savings for when you turn 60 to help with later life.

How does a Lifetime ISA affect the rest of my ISA allowance?

Your Lifetime ISA makes up a part of your annual £20,000 ISA allowance for this tax year. So if you invest the full £4,000 in one year, your remaining ISA allowance will be £16,000, which can be split between a Cash ISA, Stocks & Shares ISA or Innovative Finance ISA.

Can I have more than one Lifetime ISA?

You can have more than one Lifetime ISA, but you can only open and subscribe into one per tax year. When it comes to buying your first home, you can only use the government bonus from one of your Lifetime ISAs.

What happens to my Lifetime ISA if I become sick or die?

In the unfortunate circumstance that you develop a terminal illness and have less than 12 months to live, you can withdraw from your Lifetime ISA without a government charge once you have provided specific documents regarding your illness. You can continue to pay in to the Lifetime ISA, and still be eligible for the 25% Lifetime ISA bonus.

If the worst should happen and you die, any Lifetime ISA money, including returns and Lifetime ISA bonuses, is passed on to your beneficiaries without the 25% penalty. This includes people in your will or your next of kin if you don't have a will.

For inheritance tax purposes, your Lifetime ISA will form part of your estate upon your death.

What is the difference between a Lifetime ISA and a Help to Buy ISA?

Help to Buy and Lifetime ISAs, whilst similar, have some fundamental differences.

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Lifetime ISA
Help to Buy ISA
Who can open it? Anyone aged 18 to 39 Any first-time buyer aged 16+
Maximum contributions Invest up to £4,000 in a tax year, as a lump sum or spread out however you like. Invest up to £1,200 when you first open the account and then up to £200 a month after that.
Length of contribution and bonus Invest £4,000 a year between the ages of 18 and 50 - save up to £128,000 and receive up to £32,000 in government bonuses. Invest a maximum of £12,000 and earn a government bonus of up to £3,000.
What can it be used for? Can be used for a deposit or the mortgage on your first home, or withdrawn when you reach the age of 60. Can only be used to buy a property and the government bonus will only be paid once the house purchase is complete.
Maximum property price The maximum house price for using a Lifetime ISA is £450,000 wherever you live in the UK. The maximum house price is £250,000, or £450,000 in London.
How quickly can it be used? After paying in for 12 months. Once you've saved £1,600+.

 

Please note, you can only open a Help to Buy ISA until 30th November 2019.

To learn more about the differences and similarities between Lifetime and Help to Buy ISAs, and to understand which one may be more suitable for you, visit our full Lifetime ISA vs Help to Buy ISA guide.

Can I transfer my Help to Buy ISA into a Lifetime ISA?

Yes, but any funds that are transferred from a Help to Buy ISA to a Lifetime ISA count towards the annual Lifetime ISA limit. You cannot transfer more than the £4,000 limit in any one tax year, less any Lifetime ISA payments you have already made that year.

If you already have a Help to Buy ISA, you don’t have to transfer if you want to open a Lifetime ISA. However, you can only use the government bonus from one account to buy your first home.

What is the difference between a Cash Lifetime ISA and a Stocks and Shares Lifetime ISA?

A Cash Lifetime ISA is essentially the same as a regular savings account, except returns aren’t subject to UK income tax. It is risk-free, but your returns may not necessarily keep pace with inflation and are generally quite low. With a Stocks and Shares Lifetime ISA from The Share Centre, however, you can invest in one or a combination of our three funds of funds, depending on your attitude to risk and investment aim. Because your money is invested into the stock market, the price of your investment can go up or down. So you may end up getting back less than you paid in.

Can I use my Lifetime ISA for anything other than buying my first home or retirement?

A Lifetime ISA is designed for long term savers and, as such, aims to discourage regular withdrawals from being made. If you make a withdrawal for anything other than buying your first home, retirement after age 60, or if you become terminally ill, a 25% government withdrawal charge will be applied to the amount you want to withdraw.

For more specific information on the Lifetime ISA rules, visit our Lifetime ISA rules, rates and limits page.

First time buyers FAQs

When buying a house, what can I use the money for?

You can use the money you've saved and the government bonus towards the exchange of your first home. You must have paid into the Lifetime ISA at least 12 months ago and the purchase must be completed within 90 days of your conveyancer receiving the funds from your Lifetime ISA manager.

If it’s taking longer than 90 days for your property purchase to go through, your conveyancer can request an extension via your Lifetime ISA provider. Your provider can then apply to HMRC for a 60 day extension on your behalf, followed by a further 30 day extension if necessary.

How do I know if the property I'm buying is eligible for the government bonus?

To be able to withdraw your Lifetime ISA funds and the government bonus, the property you are buying must:

  • Be in the UK
  • Be a residential property
  • Be where you intend to live
  • Be the first and only home you own
  • Cost £450,000 or less
  • Be purchased with a mortgage

It cannot:

  • Be purchased as a buy-to-let
  • Be purchased for a friend or family member to live in

If you’re not sure whether the property you are purchasing is within the price limit of the Lifetime ISA or if you can use your government bonus, speak to your solicitor or conveyancer.

How long do I have to save for before I can buy a property?

You need to have opened and subscribed into a Lifetime ISA 12 months before you can use it to purchase a property. You don't have to have been paying into it consistently but there must be 12 months between your first subscription and withdrawal for a house purchase.

Can I use my Lifetime ISA to buy a shared ownership property?

Yes, you can use your Lifetime ISA towards the deposit when you buy your initial share of the property. However, you should be aware of the effect this has on the price limit. If you are looking to buy a shared ownership property, the £450,000 price cap applies to the full sale price of the property rather than just the share you initially buy. The full sale price is calculated as a multiple of the equity share you are buying.

For example, if you are purchasing a 25% equity share of a property for £100,000, the full sale value is £400,000. So in this case, the property price is below the price limit.

Your conveyancer will be able to calculate the sale price based on the price paid for the equity share you are buying plus the net present value of rental payments due over the term of the lease.

If you want to buy a further share in the property, using your Lifetime ISA will incur the 25% government withdrawal charge.

Can I use my Lifetime ISA to purchase a Buy-to-Let property?

No, the property you are purchasing must be your main residence. You cannot rent it out nor can you allow someone else to live there while you live elsewhere.

Can two or more people use multiple Lifetime ISAs to buy one property?

Yes. As long as everyone involved in buying the property has never owned one before you can combine your Lifetime ISAs and bonuses to purchase one property. The purchased property must be the main residence for everyone who has used their Lifetime ISA, however.

Even if you are both using your Lifetime ISAs to purchase a property, the maximum house price will still be £450,000. It doesn't increase because you are both using Lifetime ISA savings.

If I still have money in my Lifetime ISA after I buy my property, can I still access it?

Yes, you can continue to subscribe to your Lifetime ISA and receive the Lifetime ISA bonuses after you've made the property purchase (if you are under 50) and then withdraw the remaining money when you turn 60. If you withdraw the money before your 60th birthday, a 25% government withdrawal charge will be applied to the amount you want to withdraw.

What happens if the house purchase falls through?

If your property purchase doesn’t go through your conveyancer must return all of the funds to your provider.
Any interest you have earned on funds while held by your conveyancer can be paid to you directly and won't count as a withdrawal.

Saving for retirement FAQs

For how long can I keep adding to my Lifetime ISA?

You can add funds to your Lifetime ISA until you reach the age of 50. Only people aged between 18 and 39 can open a Lifetime ISA so, if you open one early enough, you could save up to £128,000 in your Lifetime ISA and receive a maximum of £32,000 in government bonuses.

When can I withdraw my money for retirement?

If you are looking to use your Lifetime ISA savings for later life, you can withdraw your money when you reach age 60. Withdrawing money before this that isn't to be used for purchasing a property will incur the 25% government withdrawal charge which means you'll get back less than you put in.

What happens if I need to withdraw my money before I turn 60?

Withdrawing money before you turn 60 will lead to a withdrawal charge of 25% of the total amount withdrawn. See ‘Can I withdraw money from my Lifetime ISA?’ for more information. If you are terminally ill with 12 months or less to live, you are able to withdraw money from your Lifetime ISA without charge.

What happens if I die before I can withdraw my Lifetime ISA?

If the worst happens and you pass away before you are able to withdraw your money, your savings will be passed to the named person or people in your will, or to your next of kin. There is no withdrawal charge for this.

Your Lifetime ISA will form part of your estate upon your death for inheritance tax purposes.

Payment information

How can I pay into my Lifetime ISA?

If you want to make regularly scheduled payments, you can set up a direct debit which will take effect on the 16th of the month. Alternatively, you can put in 'lump sum' payments; paying in at a time that suits you when you have some spare cash.

These lump sum payments can be paid by debit card online, through our mobile app, or by calling our customer service team. You can also set up a bank transfer or send a cheque to us directly.

Our bank details:

Bank of Scotland
Account name: The Share Centre Limited Client Transfer A/C
Account number: 00100130
Sort code: 12-21-37

Send cheques to:
The Share Centre
PO Box 2000
Aylesbury
Bucks
HP21 8ZB

How much can I pay in?

In this tax year you can pay in up to £4,000 to your Lifetime ISA. This can be paid in all in one go or spread throughout the year, there are no restrictions on how you contribute.

This £4,000 forms part of the overall ISA limit of £20,000 for this tax year.

Can I pay into my Lifetime ISA after my 40th birthday?

As long as you have opened and subscribed to your account by the day before your 40th birthday then yes you can continue to make qualifying payments to your Lifetime ISA each tax year, until the day before your 50th birthday.

When are the government bonuses paid?

From 6 April 2018 onwards, payments that are received by the 5th of each month will receive a bonus payment after the 19th of that month.

All subscription made directly from you qualify for a bonus. These could be subscriptions made by direct transfer, debit card or cheque (up to £4,000 per year) or transfers in from another account or provider. Please note that The Share Centre does not accept Lifetime ISA to Lifetime ISA transfers in.

Is there a limit on the size of bonus I can get?

The maximum bonus is £1,000 every tax year. However, you will only receive this amount if you have contributed the full £4,000 limit.

Do I have to pay tax on the 25% government bonus?

No. With a Lifetime ISA you don't pay Capital Gains tax or further Income Tax on the bonus or any profits.

Can I withdraw money from my Lifetime ISA?

You can withdraw money from your Lifetime ISA, without penalty, in one of the three following situations:

  • To help buy a first home worth up to £450,000, at least 12 months after you first save into the account.
  • If you become terminally ill.
  • When you reach the age of 60.

If you withdraw money for any other reason you will be subject to a withdrawal charge by the government.

The withdrawal charge is 25% of the amount withdrawn including any bonuses you might have received. Withdrawing money early will result in you losing money.

For example, if you have £1,000 in your account, your government bonus will be £250, giving you a total of £1,250. Withdrawing this money will result in a penalty charge of £312.50 (25% of £1,250). This means you'll only get back £937.50 from your initial £1,000 investment.

For this reason, a Lifetime ISA is only suitable for people who are investing to buy a home or for their retirement.

Account information

Can I transfer money from other ISAs into a Lifetime ISA?

Yes. If you have another type of ISA, like a Cash ISA or a Stocks and Shares ISA, you can transfer this money into your Lifetime ISA, provided you have not reached your Lifetime ISA limit of £4,000.

Transferring money from another ISA will use up part of your Lifetime ISA limit but will not affect your overall tax year ISA limit of £20,000 for this tax year.

Money transferred into a Lifetime ISA will also be eligible for the 25% government bonus.

Can I transfer my Lifetime ISA to The Share Centre?

No. We do not offer or accept Lifetime ISA to Lifetime ISA transfers in to The Share Centre.

If I change my mind, can I cancel my Lifetime ISA?

You can close the account without paying the government charge if you provide us with a signed cancellation instruction within 30 days. However, you will not receive any government bonus on money you paid into the account. If these cancellation rules are met, you will then be permitted to open a Lifetime ISA with another provider for the same tax year.

If you want to close the account after the first 30 days you will receive a 25% withdrawal charge on the money you already put in. If you have paid in to the Lifetime ISA in the same tax year you close it, HMRC will not permit you to pay in to any other Lifetime ISA during the same tax year.

What happens if I move to a different country?

If you open a Lifetime ISA in the UK and then move abroad, you won't be able to subscribe into it from your new country of residence (unless you’re a Crown employee working overseas or their spouse or civil partner).
You must also tell your ISA provider as soon as you stop being a UK resident.

You are able to keep your ISA open and you’ll continue to get tax-efficient benefits on money and investments held in it. If you return and become a UK resident again, you should notify your ISA provider and you will be able to start paying back into your Lifetime ISA.

If you live abroad and don't have a Lifetime ISA, you will only be able to open one if you move back to the UK.

Interested in opening a Lifetime ISA?

View our Lifetime ISA page for information on how they work, how much they cost and how to open one.