Lifetime ISA

Receive a 25% bonus towards your first home or lifetime savings

Overview

Sarah Hollowell
Sarah Hollowell
Tax & Trustee Services

What is a Lifetime ISA?

The Lifetime ISA is a flexible way for adults under the age of 40 to save for their retirement or the purchase of their first home tax-efficiently. Unlike the ISA, a Lifetime ISA rewards your commitment to saving, providing you with a 25% government bonus*. It also allows you to:

  • Contribute up to £4,000 each year
  • Receive a government bonus of up to £1,000 for every year you invest before your 50th birthday*
  • Withdraw your money tax-free for the purpose of retirement from the age of 60 or earlier for the purchase of a first home (which must cost under £450,000)
  • Invest for the long-term

*Legislation is subject to change so this benefit may not always be available

Why choose a Lifetime ISA with Killik & Co?

Whether you are looking to build your lifetime savings or are planning to purchase your first property, at Killik & Co we offer an advised service, catering to every type of investor, whatever your circumstances may be. As well as benefiting from a tax-free allowance of up to £5,000 per annum (inclusive of the 25% government bonus), at Killik & Co you also have the ability to access investments across global markets, giving your money the opportunity to work harder. Contact us via email at [email protected] or by phone on 020 7337 0777 for further information.

Please do not assume that past performance will repeat itself and you must be comfortable in the knowledge that you may receive less than you originally invested.

Who is the Lifetime ISA right for?

Any UK resident from the age of 18 to 39 years old who is looking to build their lifetime savings or make a first step on to the property ladder, whilst benefiting from a government bonus of up to £1,000. We take a long term view on investing and do not recommend anyone invest for shorter than 5 years, however should you wish to utilise a Lifetime ISA for property we would be happy to advise you on the ways to do so. Similarily, we offer advice to those considering the Lifetime ISA as an alternative to a personal pension, or as an additional savings vehicle to build their retirement pot.

Lifetime ISA rules

Buying your first home:

  • Your first property must be located within the UK and must not cost more than £450,000
  • The Lifetime ISA must have been opened for at least 12 months for you to receive any government bonus
  • The bonus is per individual, so two individuals can combine their government bonus when buying together
  • If you withdraw the money before you turn 60 and it is not to buy your first home then you will incur a 25% penalty on the total sum. This is payable to the government, unless you are diagnosed with a terminal illness or upon your death.

For your retirement:

  • Withdraw the money tax free on or after your 60th birthday
  • The Lifetime ISA can work alongside your pension. Compare the tax-efficient wrappers in our comparison below or watch our short video here
  • If you withdraw the money before you turn 60 then you will incur a 25% penalty on the total sum. This is payable to the government, unless you are diagnosed with a terminal illness or upon your death

Lifetime ISA comparison

Product

Lifetime ISA

Investment ISA

Personal pension

Minimum age

18

18 (adult ISA)

Opened from birth

Maximum age

39 to open, 49 to contribute

No

75 (for tax relief)

Basic rate tax relief on contributions @20%

No

No

Yes

Higher rate tax relief on contributions

No

No

Yes

Tax free growth within the wrapper

Yes

Yes

Yes

Government bonus on contributions @20%

Yes, capped at £1,000 per year, £32,000 total

No

No

Tax-free withdrawals

Yes

Yes

First 25% only

Penalty-free withdrawals

Subject to conditions

Anytime

From 55 (57 from 2028)

Penalty rate

25% of total fund

n/a

25% or 55% (This charge is only payable on the value of the pension which is over and above the Lifetime Allowance of £1m)

Whilst the chance of earning a government bonus is attractive, the penalties that apply to a Lifetime ISA do mean the decision to open one in place of say a standard stocks and shares ISA or a private pension must be taken with care. Some of the key criteria are summarised above and we would suggest that you seek further financial advice from one of our Investment Managers or Wealth Planners before deciding.

Get in touch

If you are new to Killik & Co and would like to talk to us about our Lifetime ISA, our team would be delighted to help. To find your nearest branch click here or alternatively, you can contact our head office via email at [email protected] or by phone on 020 7337 0777.

Download your complimentary Tax Efficient Savings Guide

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