Lifetime ISAs (LISAs) can be 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:
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 go over 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.
Get up to £1,000 extra towards your first home deposit every year 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 you could use a lifetime ISA to save extra for retirement.
Invest in a climate-focused fund with OneFamily's Lifetime ISA
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
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.
