Our Saving Specialists Answer Google's Most Searched LISA Questions

Lifetime ISAs (LISAs) are a fantastic way to start saving for your first home or to prepare for retirement.

 

We want to make getting started with your savings account as easy as possible for you, so we asked our savings specialists Google’s most searched LISA questions to give you all your answers in one place.

What is a LISA?

This stands for Lifetime Individual Savings Account. This tax-free savings account allows people between the ages of 18-39 to open an account and start saving for their first home or for retirement.

How does a Lifetime ISA work?

If you are between the ages of 18-39 you can open a LISA and invest up to £4,000 tax-free per tax year. The government will add an additional 25% of your total monthly contributions of up to £1,000 per tax year. This bonus is paid directly into your LISA.

You can use these savings to contribute to your first mortgage or to help you financially in retirement.

Who is eligible for a Lifetime ISA?

You can open a LISA if you are between the ages of 18-39.  You can contribute to the account until you turn 50.

You can use your LISA for a mortgage as long as you’re a first time buyer. You can also use it to save for retirement which you can access from the age of 60.

Can I have two Lifetime ISAs?

Yes, you can have several LISAs at one time. You can only open and pay into one LISA per tax year.   However, you can hold several LISAs at one time.

Can I use two Lifetime ISAs to buy a house?

If you and the person you are getting a mortgage with each have LISAs, you may use both LISAs to buy a house as long as both of you are first time buyers.

If the person you are getting a mortgage with has owned a house before but you have not, you can still use your LISA to get a mortgage.

Can I have a Lifetime ISA and a normal ISA?

Yes, you can have a combination of different ISAs. There is a maximum £20,000 limit you can contribute in total across all of your ISAs per year.  However, you can’t pay into more than one of the same type of ISA in the same tax year.

Can I have a Help to Buy: ISA and a Lifetime ISA?

Yes, you can have both a Help to Buy: ISA and a Lifetime ISA. However, you may only use one government bonus when getting your first mortgage.

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

Some providers may allow you to transfer your Help to Buy: ISA into a Lifetime ISA. However, this will vary depending on your provider and you will therefore have to check with them to confirm.

Can I withdraw from a Lifetime ISA?

On the 1st May 2020 HM Treasury announced Lifetime ISA holders whose income had been affected by the COVID-19 (coronavirus) pandemic would be charged a reduced withdrawal charge if accessing funds early.  

Between  6th March 2020 and 5th April 2021 (inclusive), to help people who need to access to their money earlier as a result of the outbreak the charge to make an unauthorised withdrawal from a LISA has been reduced from 25% to 20%. This will mean you will only have to pay back any government bonus you have received and the money you have invested will not be affected.  

However, LISA holders are strongly encouraged not to draw out money from their LISA unless it is absolutely essential. 

After 5th April 202, it will still be possible to withdraw money from a Lifetime ISA. However, the amount you withdraw will be subject to a 25% government penalty if you withdraw your cash for any reason other than getting your first mortgage, retiring over the age of 60 or if you're terminally ill.

 

Are Lifetime ISAs protected?

LISAs are protected by the Financial Services Compensation Scheme.

For cash savings, 100% of the first £85,000 is protected. If your LISA is made up of investments, then the first £50,000 is 100% protected.

How is a Lifetime ISA bonus paid?

The amount of government bonus you receive is based on how much you have contributed from 6th of the month to the 5th of the following month. This is then paid directly into your LISA account within 14 days of the 20th of the second month.

Is a Lifetime ISA tax free?

Yes, your Lifetime ISA is tax-free. However, if you attempt to withdraw directly from your account outside of the permitted withdrawal specifications, you will be subject to charges.

Can I put more than £4,000 in a Lifetime ISA per year?

No, you can invest up to £4,000 per tax year into your LISA, making you eligible for up to £1,000 in governmental bonuses.

However, if you are transferring money from a LISA from a previous tax year you may invest more than the £4,000 limit.

We hope we answered all your questions. If you’re interested in opening a Lifetime ISA with us, you can find out more about the LISA accounts we offer.