Lifetime
ISAs,
which
launched
in
April
2017,
are
designed
to
help
under-40s
onto
the
housing
ladder,
but
they
can
also
be
used
as
a
retirement
savings
vehicle.
Designed
to
replace
the
now-defunct
Help
to
Buy
ISA,
the
policy
was
the
brainchild
of
former
chancellor
George
Osborne
and
his
Treasury
wonks.
Though
they
replaced
Help
to
Buy
ISAs,
holders
of
Help
to
Buy
products
can
still
contribute
to
their
plans.
As
well
as the
tax
advantages
of
the
standard
ISA,
the
Lifetime
ISA
carries
a
sweetener
from
the
government –
to
show
it’s
serious
about
your
aspirations
to
become
a
homeowner.
This
in
the
form
of
a
25%
bonus,
up
to
a
maximum
of
£1,000
a
year.
If
you
max
out
the
allowance
every
year
from
age
18
to
39
you
could
pocket
£32,000
from
that
bonus
–
unsurprisingly,
then,
there
are
a
few
strings
attached.
The
Lifetime
ISA:
What
Are
The
Rules?
But
before
we
get
to
the
FAQs,
it’s
worth
noting
the conditions
surrounding
withdrawals because
these
are
punitive:
1.
Money
put
into
a
Lifetime
ISA
must
be
used
to
buy
your
first
home
OR
not
accessed
until
you’re
60
(or
if
you
become
terminally
ill) –
otherwise
you
will
incur
a
penalty
for
withdrawing
moeny
from
the
account.
2.
The
early
withdrawal
charge
is
25%.
So
says
the
government:
“a
Lifetime
ISA
is
intended
to
be
a
long-term
savings
product.
It
is
not
designed
to
encourage
regular
withdrawals.”
The
early
withdrawal
charge
was
reduced
to
20%
in
the
coronavirus
crisis
but
has
since
been
reinstated.
3.
This
means
that
withdrawals
could
end
up
costing
you
money
–
for
example,
you
put
in
£800,
the
bonus
tops
this
up
to
£1,000,
you
withdraw
the
whole
lot
and
the
25%
penalty
takes
this
back
to
£750.
So
you’re
left
with
£50
less
than
you
put
in.
4.
Financial
advisers
recommend
holding
an
instant
access
Cash
ISA
alongside
your
LISA
if
you
need
to
“dip
into”
your
funds
for
everyday
or
unexpected
expenses.
A full
explanation
of
terms
and
conditions
can
be
found
on
the
UK
government
website.
The
Lifetime
ISA:
Terms
&
Conditions
You
can
save
a
maximum
of
£4,000
a
year
into
a
Lifetime
ISA
and
you
need
to
be
between
18
and
40
to
open
an
account.
While
the
product
has
“Lifetime”
in
the
name,
you
can
only
save
every
year
until
you’re
50,
giving
you
a
maximum
of
32
years
to
enjoy
that
bonus.
Can
I
Have
a
Lifetime
ISA
and
a
standard
ISA?
Yes,
although
this
£4,000
is not in
addition
to
your
overall
annual
ISA
allowance,
so
if
you
used
your
whole
lifetime
ISA
allowance,
that
leaves
you
with
£16,000.
Tell
me
about
the
bonus!
It’s
25%
of
the
money
you
put
in,
up
to
a
maximum
of
£1,000
a
year.
The
provider
will
add
this
automatically
and
it
doesn’t
matter
if
you
drip
feed
your
money
or
put
your
whole
allowance
in
on
the
last
day
of
the
tax
year.
Can
I
open
a
Lifetime
ISA
(Cash)
and
a
Lifetime
ISA
(Stocks
&
Shares)?
Not
in
the
same
tax
year.
You
can
have
both
types
of
account
but
you
can
only
open
one
type
of
Lifetime
ISA
each
year.
Did
the
Spring
Budget
increase
the
Lifetime
ISA
allowance?
No.
The
Lifetime
ISA
allowance
has
been
£4,000
since
launch,
despite
attempts
by
lobbyists
to
increase
it
in
line
with
inflation
or
house
price
gains,
which
since
2017
have
made
it
even
harder
for
first-time
buyers.
I
already
own
a
property,
can
I
open
a
Lifetime
ISA?
You
can
open
an
account
but
you
won’t
be
able
to
use
the
money
to
buy
a
property
– only
first-time
buyers
can
use
the
account in
that
way.
A
non-FTB
can
still
enjoy
the
perks
of
the
account
(i.e.
the
bonus)
but
you
won’t
be
able
to
access
the
money
until
you
reach
age
60.
If
you’ve
previously
owned
a
home,
are
now
renting
and
want
to
get
back
on
to
the
housing
ladder,
you
are
also
not
eligible.
Can
I
use
a
Lifetime
ISA
to
buy
property
in
London?
The
current
limit
on
properties
that
can
bought
using
a
Lifetime
ISA
is
£450,000.
You
can
buy
anywhere
in
the
UK,
though
most
properties
in
London
will
cost
you
more
than
half
a
million.
This puts
home
ownership
in
the
capital
beyond
the
reach
of
most
policy
holders.
Are
Lifetime
ISAs
popular?
The
Lifetime
ISA
is
relatively
new,
so
the
product
makes
up
a
small
but
growing
portion
of
the
overall
ISA
universe
(see
official
stats
for
the
full
data),
in
terms
of
subscriptions.
According
to
HMRC
data
for
2022/23,
56,100
account
holders
withdrew
from
their Lifetime
ISAs
in
order
to
purchase
their
first
home
in
that
tax
year,
an
increase
of
around
10%
on
the
previous
tax
year.
The
average
value
of
withdrawal
for
a
house
purchase
was
£13,877.
Is
that
enough
for
a
deposit?
It’s
a
start,
but,
according
to
Zoopla,
the
average
deposit
paid
for
a
three-bedroom
house
bought
by
a
first-time
buyer
was
£34,500
in
2023.
In
areas
with
higher
house
prices,
this
is
likely
to
be
higher.
So
there’s
an
obvious
“deposit
gap”
here.
The
Lifetime
ISA
hasn’t
been
running
for
very
long
so
wannabe
first-time
buyers
haven’t
had
enough
time
to
enjoy
the
cumulative
effect
of
those
government
bonuses.
Or
maybe
they’ve
decided
not
to
wait
and
scrambled
on
the
housing
ladder
while
they
can…
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