Lifetime ISAs (LISAs) are a brilliant way to save for your first home, as you can get up to £1,000 a year added to your savings.
But they’re not right for everyone. It’s important to understand what the limits are before you open a lifetime ISA to avoid having to pay a government withdrawal charge.
There are four limits to be aware of:
Take your first step to home ownership with a OneFamily Lifetime ISA
Lifetime ISA allowance limit
Your lifetime ISA (LISA) allowance is how much you’re allowed to pay in during each tax year. The tax year runs from 6 April to the following 5 April, so the allowance limit resets on 6 April each year.
You can pay in up to £4,000 each tax year. This is roughly £333 a month.
Most LISA providers will stop you going over this limit, but if you do you might be fined. You should let HMRC know as soon as you realise you’ve gone over by calling their helpline on 0300 200 3312.
The government will pay in 25% of how much you pay in, so the closer you get to the £4,000 limit, the more government bonus you’ll get.
To make the most of the lifetime ISA government bonus, it can be a good idea to pay as much into your lifetime ISA before 5 April as you can (up to the £4,000 limit), especially if you know you’ll have more than £4,000 available to pay in the following year.
Does LISA allowance count towards ISA limit?
Yes. You can pay up to £20,000 each tax year into ISAs in your name (money you pay into someone else’s ISA, such as a child’s junior ISA, doesn’t count).
This includes your lifetime ISA limit. So, if you pay £4,000 into a lifetime ISA, you’ll have £16,000 of your ISA limit left for that tax year.
Build your first home deposit 25% quicker with a OneFamily Lifetime ISA
Lifetime ISA house price limit
You can only use a lifetime ISA if you’re buying a home for £450,000 or less, even if you’re buying with another person. This limit is the same throughout the UK, including London.
If you do end up buying a home for more than this, you’ll be charged a government withdrawal fee when you take the money out of your account, which may leave you with less money that you've paid in.
Find out what sort of property you could buy within this limit.
Lifetime ISA age limit
There are three age limits to be aware of.
- Age 39: Once you turn 40, you won’t be allowed to open a lifetime ISA. You also must be 18 or over. People often open a lifetime ISA when they’re 39 before it’s too late.
- Age 50: Once you turn 50, you can’t pay any more money into your lifetime ISA. Any payments you make will be refused.
- Age 60: If you’re not using your lifetime ISA to buy your first home, or if you decide to keep it open to save for later life, you shouldn’t take money out until you turn 60. If you do, you’ll be charged that government withdrawal fee we keep talking about.
Find out how to use a lifetime ISA to save extra for retirement.
Manage your investments with our simple online account
Lifetime ISA bonus limit
As you’re limited to paying in no more than £4,000 each tax year, the maximum bonus you can get is £1,000 a year (limit resets at the start of each new tax year, which is 6 April).
Every month, the government will top up your lifetime ISA by 25% of however much you’ve paid in during the previous month. The bonus is based only on how much money you put in, it doesn’t take into account any interest or returns.
When is the lifetime ISA bonus paid?
The lifetime ISA bonus is paid for every month that you pay into your lifetime ISA, but it’s paid in the month after.
It's worked out based on the money you pay in from the 6th of the month until the 5th of the following month. The bonus will show in your lifetime ISA account at the end of that month.
Find out more about the lifetime ISA bonus.
Next steps
- Take a look at the lifetime ISA rules to make sure it’s the right product for you.
- Decide if you’d like to open a cash or a stocks and shares lifetime ISA.
- Use our lifetime ISA calculator to find out how quickly you could reach your savings goals based on how much you want to pay in each month.
- Open a lifetime ISA
If you take out a stocks and shares lifetime ISA, like the Stocks and Shares Lifetime ISA offered by OneFamily, please be aware that there is a risk that you could get back less than you put in, depending on what the stock market does. You'll still receive the 25% bonus on everything you pay in, even if this does happen.
OneFamily Lifetime ISA
Ready to start saving for your first home?
Our lifetime ISA could help! You'll gain a 25% boost from the government on top of your savings, as well as any potential stocks and shares returns.
Your next read:
What is a lifetime ISA?
Get the low-down on how lifetime ISAs work so you can decide if it's the product you've been looking for.
Cash LISA or stocks and shares LISA?
Cash lifetime ISAs make money through interest rates, whereas stocks and shares lifetime ISAs are invested with the aim of generating investment returns.
The lifetime ISA bonus
If you're thinking of opening a lifetime ISA, you'll want to know when you're going to get the bonus and how to get as much as possible.
Lifetime ISA pros and cons
Still undecided about lifetime ISAs? This article will tell you what's good about them and what you should be aware of, so you can feel fully informed.