Lifetime ISA savers could get up to £33,000 free bonus – but deadline looms this weekend
Whether it’s to save for a mortgage deposit or to supplement pension income in retirement, saving into a Lifetime ISA (also known as a LISA) has become a habit for many. However, there is a limit as to how much can be paid in each tax year.
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Eligible savers can put in up to £4,000 each year into a Lifetime ISA, until they reach the age of 50.
This limit of £4,000 counts towards the annual ISA allowance, which is £20,000 for the 2019 to 2020 tax year.
The government will add a 25 percent bonus to savings put into a Lifetime ISA, up to a maximum of £1,000.
A person must be 18 or over but under 40 to open a Lifetime ISA.
They can save money into this account until they reach the age of 50.
Once they reach this age, savers will not be able to pay into the Lifetime ISA or earn the 25 percent bonus. However, the account will stay open and the savings will still earn interest or investment returns.
As such, depending at what point a person opens a Lifetime ISA, they could potentially save up to £4,000 a year in the account over 33 tax years – if they can afford to fully utilise the Lifetime ISA annual allowance.
As such, it may be possible to receive up to £33,000 from the 25 percent government bonuses.
However, savers may need to be aware that the tax year is ending this weekend.
This means that for those who wish to, they would need to act prior to midnight on Sunday April 5, 2020.
From Monday April 6, 2020, the new tax year will begin, and the annual ISA and Lifetime ISA limits will reset.
It’s something which Martin Lewis has addressed this week, writing in his weekly money tips email.
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The Money Saving Expert founder penned: “Saving for a first home? Lifetime ISA year ending – USE IT OR LOSE IT.
“If you’re 18 to 39 and a wannabe first-time buyer, you can open a top Lifetime ISA, which gives a 25 percent boost on up to £4k saved per tax year.
“Yet as the tax year ends on Sun, if you wait, you’ll lose this year’s allowance.”
However, savers should be aware that there are some rules which apply when it comes to savings in a Lifetime ISA.
It’s possible to withdraw money from a Lifetime ISA without a charge if it’s because the saver is:
- Buying their first home
- Aged 60 or over
- Terminally ill, with less than 12 months to live.
Otherwise, savers pay a 25 percent charge if they withdraw cash or assets for any other reason.
Gov.uk states: “The withdrawal charge aims to recover the government bonus received and apply an extra charge to the original savings.
“This means if you treat your Lifetime ISA as a short-term savings product, you could get back less than you paid in.”
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