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Did You Forget About LISA? The Only Option for First Time Buyers Left

After the discontinuation of the Help to Buy ISA last year, the Lifetime ISA is now the only ISA option available for first-time buyers. If you were able to start a Help to Buy ISA before the cutoff, then you can contribute up to £200 a month and you have until 1 December 2030 to claim your Help-to-Buy bonus. So, how does a LISA help incentivise saving for a home?


This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.


Lifetime ISA in brief

In April 2017, the government launched LISAs to enable UK residents (as well as crown servants and their partners) to buy their first home or to save for retirement through cash, stocks and shares, or a mix of both. In order to open a LISA, you must be between the ages of 18 and 40 and you can make contributions until the age of 50.

After 50 you will still earn interest or investment returns even though you can’t add additional money to your account and at age 60 you can start making withdrawals without penalties. If you make any withdrawals before this, other than on terminal illness or towards buying a home, a penalty of 25% will be charged.

LISA contribution allowances:

  • Your contribution limit: £4,000 per tax year and counts towards your overall £20,000 ISA limit.
  • Government contribution: A 25% bonus on your savings, up to £1,000 per year on top of the £4,000 you saved.


Help for homebuyers

To use your LISA savings when you buy a home, certain conditions must be met:

  • The property must cost £450,000 or less
  • You’re taking out a mortgage on the property
  • You must have the LISA account for at least 12 months before purchasing a home
  • A conveyancer or solicitor needs to act for you in the transaction (your ISA provider pays them directly).

If you’re buying a home with someone else, you are both able to use the savings from your LISAs for the purchase. However, if you are lucky enough to have both a Lifetime ISA and a Help to Buy ISA, you can only use the government bonus portion from one or the other towards buying the home.


Professional advice

As there’s a possibility you might face penalties for early withdrawal with a LISA and there’s no such worry with a Help to Buy ISA, it’s wise to seek professional financial advice before proceeding.

While time may be nearly up to contribute this tax year, you should consider including it as part of your plan moving forward. A financial adviser can help incorporate a LISA into your overall financial plan so buying a home in the future is less stressful. Get in touch with our IFAs today to get started on your plan.


Considering a LISA as part of your financial plan?
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