Lifetime ISA

One of the most exciting announcements in the March 2016 budget was the introduction of a new Lifetime ISA from April 2017. This new ISA is aimed at younger investors looking to save for a property purchase or retirement and most importantly - contributions will be topped up by the government. 

Full details of the new ISA will be published in the autumn following an industry consultation but here are some of the key facts we know so far:

  • The Lifetime ISA can only be opened by savers aged between 18 and 40
  • Savers can contribute up to £4,000 p.a. which will be topped up by a government bonus of up to £1,000 until they reach the age of 50
  • All the money can be withdrawn before 60 including the bonus to fund the purchase of a first home - provided it is located in the UK and worth up to £450,000
  • Once you reach the age of 60 you can withdraw all your funds tax free
  • Other withdrawals will be allowed but will be subject to a charge of 25% of the amount being withdrawn.
  • The overall ISA allowance will increase to £20,000 in the 2017/18 tax year and contributions made to Lifetime ISAs will count towards this limit
  • You’ll also be able to roll Help to Buy ISAs into Lifetime ISAs

So a saver who puts £4,000 every year into a Lifetime ISA from the age of 18, will receive a huge £32,000 bonus before any interest or growth (assuming these limits are unchanged).

Compare Lifetime ISAs, Stock and shares ISAs and SIPPs


Lifetime ISA

Stocks & shares ISA


When available

6 April 2017



Age you can start

18 – 40*

18 +

Any age

Annual Savings limit

Max £4,000 per year (overall ISA limit will be £20,000)

£15,240 (rising to £20,000 in April 2017 across all ISAs)

Max £40,000 per year. Highest earners restricted to as little as £10,000.

Upper age limit for paying in



75 (for tax relief)

Lifetime Savings Limit



Currently £1 million including payments in and investment growth

Government contribution

25% bonus


20% tax relief (equivalent to 25% bonus) paid into pension. Higher rate and additional rate tax relief can be claimed separately

Employer top-ups



Can be paid

Investment options

Either cash or stocks & shares

Stocks & shares

Some restricted to limited range of funds, some offer wide range of investments including property.

Tax on investment growth



None, as long as you stay inside the lifetime allowance

Age you can access

Anytime – however only penalty free after 60 or to fund first home purchase up to £450,000 before 60



Early access penalty

25% of the amount being withdrawn


No early access permitted unless in ill health

Position on death

Subject to IHT, no further tax charges, spouse can inherit value of LISA as additional subscription allowance

Subject to IHT, no further tax charges, spouse can inherit value of Stocks & shares ISA as additional subscription allowance

Free of IHT, potentially tax charges if die after 75

*Applications can be made until your 40th birthday.

More details of the Lifetime ISA will be announced over the coming months please register to receive updates.

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