Lifetime ISAs are almost a year old, but many people are still confused about how to claim their 25% interest.
Launched last year, the Lifetime ISA is designed to help younger people help to buy their first home. It allows those under the age of 40 to deposit up to £4,000 per year into the account each tax year. Any money in the account earns a 25% bonus from the government which can only be used against the cost of buying a first home. This means that savers can earn a maximum of £1,000 in interest every year.
Criteria For the Lifetime ISA
There are certain criteria to be able to take advantage of the 25% government bonus. The home must be your first house purchase, and be located in the UK. You must also purchase the house with a mortgage (as opposed to paying with cash), and cost £450,000 or less. You must also reside in the property, and cannot use it as a buy-to-let property. You and a partner can both use your Lifetime ISA bonuses to buy together, but if you buy with someone who isn’t a first time buyer, they will not be able to use any bonus (you will be able to use yours though).
Withdrawing Your Bonus
You cannot withdraw any cash as you will have to pay charges. You must apply to your Lifetime ISA provider to have the money sent to your solicitor to have it processed. The money you have saved and the bonus can be used when placing your deposit, and if the sale falls through, the exact same amount will be returned in full to your solicitor to be placed back into your ISA. If for some reason you become ineligible to access your bonus, but you do not wish to pay charges to withdraw your money, you can leave your money in the ISA until you reach the age of 60. You can then access all the money, and the bonus without incurring any charges. You can save into the account until the age of 50, and use this money for retirement.
If you would like more information on Lifetime ISAs or advice on buying your first home, please get in touch. Our advisers will be happy to help.