Lifetime ISA Now Available to Help First Time Buyers
As of 6 April 2017 the Lifetime ISA is now available to help those under the age of 40 save for a deposit for a first home. The Lifetime ISA, or LISA, offers a government bonus of 25% on top of whatever you save. While younger doctors might consider one for themselves, any doctors who are (grand)parents and want to help their (grand)children onto the property ladder might consider gifting them the money to open an account.
As might be expected, certain conditions apply. Firstly, only those aged 18-39 are eligible. Then, there is a maximum amount that can be contributed each tax year - currently £4,000 for 2017/18. This uses part of the overall ISA allowance of £20,000, so if for example you subscribe the maximum to a LISA you have £16,000 remaining to subscribe to other types of ISA (e.g. Cash, Stocks & Shares).
In order to retain the government bonus, the money must be used for the deposit for a first home. Therefore only first time buyers are eligible, as long as buying a main home and not a buy-to-let. Alternatively, the money, including the bonus, can be saved until age 60 then used in retirement. If it is taken out at any other time there is a penalty charge of 25%.
If buying a home, the purchase price must be less than £450,000 and the home must be bought with a mortgage. The earliest the LISA contribution and government bonus can be used to purchase a property is 12 months after opening the account. Therefore, if you decide a LISA is right for you, the sooner you open an account the sooner the 12 month clock starts counting down, giving greater flexibility for when you can buy. Those who will be purchasing within 12 months need to consider alternatives such as the Help to Buy ISA instead.
Tax rules are subject to change and the value of any benefits depends on individual circumstances. If you would like to discuss Lifetime ISAs with a financial adviser please contact Richard Higgs CFP FPFS on firstname.lastname@example.org or 0117 966 5699.