With 2016/2017 year-end fast approaching, we take this opportunity to highlight to you how you could save for your first home or for retirement with the new Lifetime ISA launching on 6 April 2017. Discover how as a first-time buyer you could receive 25% bonus on top of your savings, what the difference is between the Lifetime ISA and Help to Buy ISA and, which one is most appropriate for you:   

What is the Lifetime ISA?

The Lifetime ISA is to launch on 6 April 2017 and it has two specific objectives: to help first-time buyers and, to assist those saving for retirement. A juxtaposition it may seem but behavioural economics suggests that this solution will help everyone. Once a first-time buyer has bought a home they are able to continue the ISA towards their retirement.

Here are the key points of the Lifetime ISA:

  • To open a Lifetime ISA, you must be between the ages of 18 and 40.

Note, that if you turn 40 on 6 April 2017, you are not eligible to open a Lifetime ISA.

  • You can save up to £4k per year in lump sums or whenever you are able to within the same financial year thereby receiving a possible 25% bonus at each tax year end
  • The maximum bonus you can receive is £32k assuming you open the ISA on your 18th birthday and contribute the maximum £4k every year until you turn 50 years old
  • The saved money is to be used for your first owned property that values less than £450k or is to be used for retirement after the age of 60
  • You must have held the Lifetime ISA for 12 months or more before using it towards your first home
  • You must be purchasing your property with a mortgage
  • No tax to pay when money is taken out unless early withdrawal
  • For retirement, you can access the cash on or after your 60th birthday
  • Couples can have one each – Lifetime ISA is an individual product

What is the difference with Lifetime ISA vs Help to Buy ISA?

The Lifetime ISA for first-time buyers sounds very similar to the Help to Buy ISA which was launched in December 2015 but there are fundamental differences between the two. Before, going into them, it is important to note that you are able to have both a Help to Buy ISA and a Lifetime ISA. However, you are only able to use the bonus received from one of them towards purchasing your first home.

Here is a comparison table from Money Saving Expert on the differences between the Lifetime ISA and the Help to Buy ISA:

Lifetime ISA vs Help to Buy ISA by Money Saving Expert Website

Via Money Saving Expert

Which ISA should I get to buy my first home?

Understanding which ISA to buy is difficult to explain due to differing circumstances and that the public information is currently only a provisional guide. Nonetheless, watch the video below of Money Savings Expert, Martin Lewis clarifying the Lifetime ISA and Help to Buy ISA differences into easy to digest information:

Please note that all information above is purely a provisional guide and are taken from other websites. For personal financial advice, please consult a financial advisor. Any financial issues can be raised with Financial Ombudsman Service.

Money Saving Expert

HWB Accountants

Telegraph ISA news article


Government Website