With effect from April 2017, individuals aged between 18 and 40 will be able to set up a Lifetime ISA. It is possible to save up to £4,000 each tax year into the Lifetime ISA, and receive a government bonus of 25% – that’s a bonus of up to £1,000 per tax year. Any savings put into the scheme before the individual’s 50th birthday will qualify for the 25% bonus from the government.
The funds in the Lifetime ISA can be used towards a deposit on a first home worth up to £450,000. Accounts are limited to one per person rather than one per home, so two first time buyers can both receive a bonus when buying together.
If you have a Help to Buy ISA, you can transfer those savings into the Lifetime ISA from April 2017, or you can continue saving into both ISAs, but you will only be able to use the bonus from one to buy a house.
Alternatively, the Lifetime ISA can be used as a savings/investment account and the funds can be accessed tax-free after your 60th birthday.
It is possible to withdraw the money at any time before you turn 60, but you will lose the government bonus and any interest or growth on the bonus and you will also have to pay a 5% penalty charge.