How does a Lifetime ISA work?

You can invest up to £4,000 into a Lifetime ISA (LISA) each year and the government will add a 25% bonus up to a maximum of £1,000 per year. The government pays the bonus directly into your LISA, based on any payments you have made into your account during the year. Furthermore, any profits made on investments in your ISA are not subject to capital gains tax (CGT).

After at least 12 months, you can withdraw from your LISA to fund the purchase of your first home if it is under £450,000. Alternatively, you can withdraw the funds from your 60th birthday. The government will allow you to withdraw money from your LISA if you are terminally ill, with less than 12 months to live.

Withdrawals for reasons which do not meet the above criteria may be subject to a 25% penalty on the value of the withdrawal, meaning you could get back less than you invested. This penalty will also apply if you transfer money from your LISA to any other type of ISA.

- Submitted on 5th Apr 2021

Did this answer your question?