Lifetime ISAs (LISAs) are a type of saving or investment account designed to help you save up to buy your first home or save extra for retirement. The game-changing bonus of up to £1,000 each tax year can help you reach your big life goals faster.
As with all ISAs, lifetime ISAs are tax-exempt. This means that no matter how much your savings or investments grow, you won't pay any tax on the money you withdraw.
Combined with the government bonus, this makes lifetime ISAs a powerful tool for building your first-home or retirement pot.
Which is why a massive 56,900 people used a lifetime ISA towards their first-home deposit in the 2023/24 tax year!
Get up to £1,000 extra towards your first home deposit every year with a OneFamily Lifetime ISA
How do lifetime ISAs work?
If you’re dreaming of having a place of your own one day, or you’re thinking ahead to later life, a lifetime ISA could make your money work harder for you. But it’s important to understand how it works, so you can decide if it’s right for you.
You need to be aged 18-39 to get a lifetime ISA. Once opened, you can pay in as you would with any savings or investment account - either with a Direct Debit or by manually transferring money in.
Lifetime ISA bonus
This is what sets lifetime ISAs apart from other ways to save up.
Every month that you pay into your lifetime ISA, the government gives you a 25% bonus on everything you pay in. So, if you pay in £100, you'll get £25 of free money on top.
The more you pay in, the more bonus you get! Which means you'll get those first-home keys in your hand quicker.
You can put up to £4,000 into your lifetime ISA each tax year, so there's up to £1,000 bonus available each year. We'll claim the bonus for you every month, based on what you paid in the previous month. So, it's all taken care of for you.
Growing your money
You can choose to open a stocks and shares lifetime ISA or a cash lifetime ISA.
As well as the bonus, you'll either get interest (with a cash LISA) or, hopefully, investment returns (if you choose a stocks and shares LISA).
OneFamily’s Lifetime ISA invests in stocks and shares because we believe this gives your money the best chance of out-growing inflation.*
Paying in
You can pay up to £4,000 into a lifetime ISA each tax year. But if you're paying into another type of ISA as well, be aware that the total amount you can pay into ISAs (including your lifetime ISA) is £20,000 each tax year (tax year runs April to April).
You can keep paying into your lifetime ISA - and receiving the bonus - until you turn 50. So, if you use your lifetime ISA to buy your first home, you can carry on putting money away for life after 60.
Withdrawing from a lifetime ISA
If you're withdrawing money to buy your first home, you need to instruct your conveyancing solicitor to use the money in your lifetime ISA towards your deposit. Your provider will then send them the money.
Once you turn 60, you can withdraw money from your lifetime ISA directly into your bank account.
Lifetime ISAs are tax-exempt, which means when it's time to withdraw your money you won't pay any Income Tax or Capital Gains Tax.
*Compared to cash lifetime ISAs, which grow your money with interest rates. As with all investing, the value can go up and down and you could get back less than you’ve paid in.
Take your first step to home ownership with a OneFamily Lifetime ISA
Lifetime ISA eligibility and rules
Eligibility
To open a lifetime ISA you must be:
- a UK resident
- aged between 18 and 39 (inclusive).
You can transfer a lifetime ISA that you hold with another provider to OneFamily.
You can also transfer to a OneFamily Lifetime ISA from a cash ISA, stocks and shares ISA, or matured Child Trust Fund - so long as the value is £4,000 or less. The same applies to anyone under 40 with a Help to Buy ISA.
Rules
There are a few lifetime ISA rules that you need to follow, otherwise you may end up paying a government withdrawal charge. We'll discuss that in more detail below. To avoid the penalty charge you must:
- use your lifetime ISA towards your first home (through a conveyancing solicitor), or wait until you're 60 to withdraw your money
- buy a home costing no more than £450,000. You must also intend to live in it and you must buy it with a mortgage
- have your lifetime ISA open, with money in it, for at least a year before you use it to buy your first home.
The lifetime ISA withdrawal charge
As mentioned above, if you don't stick to the lifetime ISA rules, you'll be charged a 25% withdrawal fee when you take money out.
As the charge is 25% of the amount you withdraw, it means you could lose some of the money you’ve paid in as well as the bonus you've been given. This is because the amount you withdraw is a combination of money you’ve put in, the government bonus, and any interest or growth.
You can learn more about the charge under different scenarios in our withdrawal charge article.
Build your first home deposit 25% quicker with a OneFamily Lifetime ISA
How to use a lifetime ISA to buy your first home
You can pay money into your lifetime ISA as you would with any savings account. Then, when it's time to buy your first home, ask your conveyancing solicitor to use money from your lifetime ISA towards your deposit.
- You need to have your lifetime ISA open, with money in it, for at least a year before you buy your first home
- The home you buy must be for you to live in - you can't rent it out as a buy-to-let
- The property you buy needs to be valued at £450,000, or less, and you'll need to be using a mortgage as well as your lifetime ISA
- The property must be in the UK
Find out more about using your lifetime ISA to buy your first home.
How to use a lifetime ISA for life after 60
After your 60th birthday you can withdraw money from your lifetime ISA, tax-free and without paying any withdrawal charges. Tax advantages depend on your individual circumstances and could change in the future.
- You can keep paying money into your lifetime ISA until you turn 50 and withdraw after 60 (or earlier if it's to buy your first home)
- Lifetime ISAs don't come with the same benefits as pensions. They can be a useful way to top up your savings for life after 60, but you might be better off using a pension as your main way to save for retirement
- If you're not sure whether a pension or a lifetime ISA is right for you, it might be worth speaking to someone you trust to give you sound financial advice
Find out more about the differences between a pension and a lifetime ISA.
Open a OneFamily Lifetime ISA
Our Lifetime ISA comes with a 25% government bonus, worth up to £1,000 a year!
Our Lifetime ISA invests in stocks and shares, so the value is likely to go up and down over time. This is normal for this type on investment, but it means there is a risk you could get back less than you put in if you withdraw at a time when the value is lower.
