The Lifetime ISA can help you build up a deposit to buy your first property, or to fund your retirement, by giving you a 25% tax free bonus each year.

You can choose from two types of Lifetime ISA:

  • Stocks and shares: At first, this is the only type of Lifetime ISA available. You are eligible for the bonus, but your capital will be at risk due to the volatility of the stock market.

  • Cash: There are currently no cash Lifetime ISAs available, but there will in the summer. You qualify for the bonus and earn interest based on what the savings provider you choose offers.

Speak to an independent financial adviser if you are unsure if a stocks and shares Lifetime ISA is right for you.

How will it work?

Whether you choose a stocks and shares Lifetime ISA or a cash Lifetime ISA, the way they both work means you can:

  • Pay in up to 4,000 a year: You will earn a 25% bonus on anything you add during the tax year, up to a maximum bonus of 1,000.

  • Build up a house deposit: You can withdraw the money from your Lifetime ISA without any charges if you use it towards your first mortgage deposit.

  • Build up a retirement fund: The Lifetime ISA pays a 25% bonus each year until you are 50. However, you have to wait until you are 60 to make a withdrawal.

What happens if you withdraw early?

You can withdraw your money from a Lifetime ISA for other reasons than for a property deposit or for retirement, but you will be charged.

You will face a 25% deduction on anything you withdraw, which could end up costing you more than you have put into the account.

For example, if you have 4,000 in your Lifetime ISA, and get your bonus at the end of the tax year, you then have 5,000. If you then try to withdraw 5,000, you will face a 25% charge of 1,250, meaning you only get 3,750 in cash.

Lifetime ISA FAQs

Q

How many Lifetime ISAs can I have?

A

One, and you can only pay up to 4,000 into it each tax year. This leaves you with the rest of your ISA allowance to use in another ISA.

Q

When do I get the bonus?

A

It should be added to your Lifetime ISA at the end of the tax year, 4th April. However, check with your provider before opening your account to be sure.

Q

Is the bonus better on a Lifetime ISA or Help to Buy ISA?

A

They both offer a 25% bonus, but the Lifetime ISA lets you use it towards your mortgage deposit, and the Help to Buy ISA pays it off your mortgage instead.

About our Lifetime ISAs comparison

Q

Who do we include in this comparison?

A

We include Lifetime ISAs from our panel. They are regulated by the Financial Conduct Authority (FCA).

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Q

How do we make money from our comparison?

A

We have commercial agreements with some of the companies in this comparison and get paid commission if we help you take out one of their products or services. Find out more here.

You do not pay any extra and the deal you get is not affected.