Stocks and shares, Lifetime and Junior ISAs risks

Annual limits and payments

The amount you can invest into an ISA each year is decided by the government. Currently you can invest up to £20,000 in adult ISAs including a stocks and shares ISA and how you split the money between different types of ISAs doesn’t matter provided you don’t go over the limit in total.

Payments to a Lifetime ISA count towards the overall ISA limit, and you can only pay £4,000 to a LISA each tax year. You can invest £4,128 into a Junior ISA.

It is worth remembering that the annual subscription allowances are only available for each single tax year, so if you don’t use your allowance in any year you will lose it.

Tax benefits of ISAs

Currently ISA investments are free from capital gains tax and income tax. Payments to a Lifetime ISA receive a government bonus of 25% - up to £1,000 pa. These benefits and bonus payments may be changed or withdrawn by the government in the future and you should make sure that you understand any changes that are made.

Withdrawals from a Stocks and shares ISA and Junior ISA

Once you have invested the annual maximum you can’t make any further subscriptions in the tax year. If you withdraw money from your stocks and shares ISA or Junior ISA you will not be able to pay it back in if you have reached your annual subscription limit. If you decide to transfer an ISA from one company to another you will need to do this as an ISA transfer rather than take money out and pay it back in again.

Withdrawals from a Lifetime ISA

You are able to withdraw money from your Lifetime ISA without penalty to go towards the purchase of your first home up to a value of £450,000 – this is only available after holding the Lifetime ISA for `12 months. You can also withdraw the money when you reach 60 or if you have a terminal illness without penalty. If you withdraw your money in any other circumstances you will have to pay a 25% government withdrawal charge which means that you may get back less money than you put into your Lifetime ISA.

Special rules apply to withdrawals made in the 2017/18 tax year. It is only possible to withdraw all the funds from your Lifetime ISA and the Lifetime ISA will be closed. As the government bonus will not have been paid you will not have to pay the government withdrawal charge. However, you are not able to withdraw part of the monies from your Lifetime ISA in the current tax year.

Lifetime ISA and pensions

You should carefully weigh up whether you want to save into a Lifetime ISA instead of enrolling in a workplace pension scheme as this would mean you’d lose the benefit of employer contributions.

Your current and future entitlement to means-tested benefits could be affected, too. Your pensions aren’t normally counted when working out whether you’re entitled to means-tested benefits, but your Lifetime ISA would be.

Transferring ISAs

You can transfer investments or cash to our stocks and shares ISA and Junior ISA. If you choose to transfer in cash remember you will be out of the market while the transfer takes place which means you will not be affected by market rises or falls during this time.

Lifetime ISAs can be transferred from one provider to another. Additionally Help to Buy ISAs can be transferred to Lifetime ISAs. If you transfer a Help to Buy ISA before 5 April 2018 it doesn’t count towards the annual Lifetime ISA allowance. You can transfer your Help to Buy ISA to an AJ Bell Youinvest Lifetime ISA, but we're not currently able to accept transfers from other types of ISA. We expect to offer these later in 2017.