The lifetime ISA will be available from April 2017 to help young people save for long term, particularly when buying a first home.
You can open a lifetime ISA if you are aged 18 or over but under 40. As with other ISAs, you won’t pay tax on any interest, income or capital gains from cash or investments held within your lifetime ISA.
Saving in a lifetime ISA
You can withdraw the funds held in your lifetime ISA before you’re 60, but you’ll have to pay a withdrawal charge of 25% of the amount you withdraw.
A withdrawal charge will not apply if you are:
If you die, your lifetime ISA will end on the date of your death and there won’t be a withdrawal charge for withdrawing funds or assets from your account.
Saving for your first home
Your lifetime ISA savings and the bonus can be used towards buying your first home, worth up to £450,000, without incurring a withdrawal charge. You must be buying your home with a mortgage.
You must use a conveyancer or solicitor to act for you in the purchase, and the funds must be paid direct to them by your lifetime ISA provider.
If you are buying with another first time buyer, and you each have a lifetime ISA, you can both use your government bonus. You can also buy a house with someone who isn’t a first time buyer but they will not be able to use their lifetime ISA without incurring a withdrawal charge.
Your lifetime ISA must have been opened for at least 12 months before you can withdraw funds from it to buy your first home.