Lifetime ISA FAQ

Money Advice Service

Want to know more about Lifetime ISAs? In this guide, we answer some of the most frequently asked questions.

Do my Lifetime ISA savings count towards my ISA limit for the year?

You can put a maximum of £4,000 into a Lifetime ISA each tax year.

Yes. Any money put into a Lifetime ISA will eat into the overall ISA limit for that year.

Example

In the 2018/19 tax year, the ISA allowance is £20,000. If you put £1,000 into a Lifetime ISA, your remaining allowance, across all ISA products, is £19,000.

Transferring money from a different ISA

If you have invested money in a previous tax year into another type of ISA (for example, a cash ISA, a stocks and shares ISA or an innovative finance ISA), and transfer that into a Lifetime ISA, it will affect the annual £4,000 Lifetime ISA allowance, but not your overall ISA limit because it was already in an ISA before the current tax year began. Tax years run from 6 April to 5 April.

To transfer into a Lifetime ISA from another Lifetime ISA there is no government withdrawal charge and your annual Lifetime ISA allowance is not affected.

Example

During the 2018/19 tax year, you invested £1,000 in a Cash ISA and then transferred it to your Lifetime ISA in the 2019/20 tax year.

In this scenario, your remaining allowance for your Lifetime ISA for the 2019/20 tax year is £3,000, but your overall ISA allowance for the tax year remains £20,000.

Are transfers from another ISA eligible for the government bonus?

Yes. Transfers to a Lifetime ISA from a previous year’s:

  • cash ISA
  • stocks and shares ISA
  • innovative finance ISA

are all eligible for the government bonus and will not count against the £20,000 overall ISA limit for the 2019/20 tax year in which the transfer takes place.

However, these transfers do count towards the annual £4,000 Lifetime ISA contribution limit unless the transfer is from another Lifetime ISA.

Is there a limit on the size of bonus you can get?

The maximum bonus you can get in a year is £1,000 (25% of the £4,000 maximum yearly contribution).

If you open your Lifetime ISA when you turn 18 and contribute £4,000 a year, until you’re 50, you could earn up to £32,000 in bonuses.

Minimum contribution

The government has not set a minimum amount you need to save to get a bonus. However, your provider might have a minimum investment to open a Lifetime ISA.

How is the bonus calculated?

The bonus will be 25% of the amount you pay in, not including investment interest or investment growth calculated based on payments you make into your account from the 6th of the month to the 5th of the following month.

This means that if you invest £4,000 in a year, but your investment goes down in value before the claim is made, you’ll still be entitled to a bonus of £1,000 that year.

How do I claim the bonus?

Your Lifetime ISA manager will claim the bonus from HMRC for you and add it to your Lifetime ISA.

You don’t need to claim yourself.

When is the bonus paid?

From April 2018, any bonus will be paid monthly and is calculated based on payments you make into your account from the 6th of the month to the 5th of the following month.

Will I get interest on my government bonus?

Yes. Once a bonus is paid into your Lifetime ISA, you can invest it just like your other ISA savings.

However, it’s a good idea to check with your provider as some may treat bonus payments very differently. Some will automatically re-invest bonus payments taking advantage of any potential growth and increase in value. Some may put your money into non-interest earning cash accounts meaning you could miss out on interest or future potential growth of your invested fund.

Is the property I’m buying eligible for the government bonus?

To be able to withdraw your Lifetime ISA savings, including the government bonus, the property you are buying must:

  • be in the UK
  • cost £450,000 or less
  • be the only home you own
  • be where you intend to live, and
  • be purchased with a mortgage.

Can I use my Lifetime ISA with other government housing schemes?

Yes. You can use your Lifetime ISA with other government schemes, such as the Help to Buy: Equity Loan scheme.

Details of Government housing schemes can be found on the Government’s Own Your Home website.

I want to buy a first home with somebody else. Can we both use a Lifetime ISA?

Yes. You can each use Lifetime ISA savings to buy your first home, provided you both meet the eligibility criteria.

If only one of you meets the eligibility criteria, for example, if one of you already owns a property, then only the person who meets the criteria can use their Lifetime ISA funds.

Can I open a Lifetime ISA and then buy a house immediately with a government bonus?

No. You can only withdraw funds from your Lifetime ISA (without paying a charge) to purchase a first home, at least 12 months after putting money in your Lifetime ISA.

This applies to each Lifetime ISA that you open, but it does not apply to Lifetime ISA transfers.

For example, if you open a Lifetime ISA with a bank in May 2019, and transfer the account to another bank in October 2019, the 12 month period starts from May 2019.

Can I transfer my Help to Buy: ISA into a Lifetime ISA?

Yes, but the amount transferred in will count against the £4,000 LISA maximum. So, if you transfer in £1,000 after 6 April 2019 you’ll only be able to put in £3,000 to your LISA for the tax year 2019-20.

Remember, if you transfer funds from other types of ISA into your Lifetime ISA, the start date of your account is the day you opened your Lifetime ISA, not the date you opened your previous ISA.

Can I use my Lifetime ISA bonus for my exchange deposit?

Yes. Lifetime ISA funds, including the bonus, can be put towards an exchange deposit.

However, the property purchase must be completed within 90 days of your conveyancer receiving the withdrawn funds from your Lifetime ISA manager.


What happens if I become terminally ill?

If you become terminally ill and have less than 12 months to live, you will be able to withdraw some or all of the funds (including the bonus) without any withdrawal charge, regardless of your age.

You will need to provide your ISA manager with evidence from a registered medical practitioner that you are expected to have less than 12 months to live.

A registered medical practitioner must be fully registered with the General Medical Council and have a licence to practice medicine.

Can I use my Lifetime ISAs to purchase a Shared Ownership property?

If you’re buying your first home through shared ownership, your Lifetime ISA can be used towards the deposit when you buy your initial share of the property.

However, any subsequent purchase of shares will incur a 25% government withdrawal charge in the future.

More information on Lifetime ISAs

This article is provided by the Money Advice Service.

Some important information about Rest Less Money

We want you to understand the positives, but also the limitations of using our site. We operate in a journalistic manner and therefore all information, guidance or suggestions provided are intended to be general in nature, and you should not rely on any of the information on the site in connection with the making of any financial decision.

When we set out to build Rest Less Money, we wanted to be a trusted place where you could find helpful information about financial matters affecting the over 50s. As a free to use resource, we try hard to provide the best information we can, but we cannot guarantee that we won’t occasionally make mistakes. So please note that you use the information on our site at your own risk, and we can’t accept liability if things go wrong.

Key things to remember when using Rest Less Money:

We do not offer financial advice – As a journalistic site, it’s important to know that we do not provide financial advice. You should always do your own research before choosing any financial product so that you can be certain it is right for you and your specific circumstances. If you are in any doubt, please seek professional financial advice from a regulated financial advisor.

No Liability – please note that you use the information on Rest Less Money at your own risk and we can’t accept liability for how you choose to use the information given on our site. We will often provide links to content or products and services available on other third-party websites. These are provided purely for your convenience and we cannot be held responsible for any content, or any of the products and services offered on any website that we link to.

 

Accuracy of Information – We try to make sure that all the information provided on Rest Less Money is correct at the time of publishing as we want it to be the most helpful resource possible. Sadly, we are not perfect however, and so we can make no guarantees as to the completeness, accuracy, adequacy or suitability of the information available on the site.
Whilst we work hard to try and provide accurate information, deals and prices can change, so whilst they may be correct at the time of writing, providers may subsequently decide to alter them later – so always double check first.

A final note on the Rest Less Community Forums – always remember that anyone can post their opinion on the Rest Less Community Forums, so it can be very different from our own opinion and may not be factual or well researched. Always be wary of any content posted on the forums and be sure to do your own research and due diligence on anything suggested. 

We hope you find Rest Less Money a useful resource and we would welcome your feedback at [email protected] on how to make it even better. For more information on any of the above you can read our full terms and conditions.

Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp
Share on email

Get the latest advice, news and inspiration

No spam. Just interesting and useful stuff, straight to your inbox. For free.

By providing us your email address you agree to receive emails and communications from us and acknowledge that your personal data will be used in accordance with our Privacy Policy. You can unsubscribe at any time by following the link in our emails.

Join the Rest Less Money Club

Sign up today to get early access. Coming soon.