The Taylor&Emmet Blog

Lifetime ISAs: Helping young people step onto the property ladder…

Sarah is here to help house buyers and sellers get to grips with the conveyancing process. This month, she highlights how the government is encouraging young people to step onto the property ladder…

Lifetime ISAs

As Help to Buy ISAs are no longer available, a new scheme has been introduced to encourage first time buyers to save for a deposit, by giving them additional bonuses from the government.

Known as Lifetime ISAs, they are an effective and affordable way to save for your first home or retirement. Anyone between the ages of 18 and 39 can open one and you can choose to pay in cash or invest in the stock market.

You are allowed to save up to £4,000 per year in your Lifetime ISA, as part of the £20,000 ISA allowance everyone receives. Currently, any growth is free of tax, but clearly, these rules could change.

Unlike other savings schemes, Lifetime ISAs attract a further 25% bonus from the government. For example, for every £4 you invest, you will receive an extra £1. This is intended to encourage long-term commitment and you can still pay in and receive this benefit until you reach 50.

For information, you are classed as a first-time buyer if you do not own and have never owned, any residential property anywhere in the world, either by yourself or jointly with someone else. This includes homes you have inherited or been given. If you do not meet these conditions, you will not receive the government bonus.

Opening a Lifetime ISA

Lifetime ISAs can only be opened in one person’s name, but if you are buying a house as a couple, you can each have individual accounts.

If you have an existing Help to Buy ISA, you are still eligible for a Lifetime ISA. If you wish, the money you have saved so far can be transferred so you receive a bigger bonus, as there are no penalties on withdrawals from Help to Buy ISAs. You can also transfer money from other ISAs, although you cannot move funds from one Lifetime ISA to another.

Using your ISA savings

Lifetime ISAs can be used to make an eligible house purchase from 12 months after your first payment.

If you want the money for any other purpose, you would have to wait until you are 60 to withdraw it tax free. If you need the money before this point for something other than your first home, you would have to pay the government withdrawal charge. This means you don’t receive the bonus and may also lose some of the savings you have invested.

There is no minimum amount that can be withdrawn from a Lifetime ISA for a first house purchase, providing all the conditions are met and there is no limit to the number of charge-free withdrawals you can make.

It is perfectly acceptable to have more than one Lifetime ISA, with the same or different providers, so you may need to make several withdrawals to cover your deposit and complete the purchase. All of these must be put towards the cost of the house, however, and the same process followed for each one.

Buying a house with your ISA

If you decide to use the funds from your Lifetime ISA to purchase a property, be sure to let your solicitor know at the outset, so the relevant forms and information can be obtained and the transaction is not delayed.

Most providers require at least 30-days’ notice that you wish to withdraw your money, so bear this in mind when agreeing a completion date. They will then release your entire account, including the bonus. Your solicitor will send you a declaration form that you should sign and return.

You need to be buying your home with a mortgage, regulated purchase plan or through a shared ownership arrangement to qualify for the government bonus. You can buy a property cash, but you will be subject to the withdrawal charge mentioned earlier.

If you have a question about moving home, our residential property expert, Sarah Gaunt, would love to hear from you. Email:

Sarah Gaunt

Sarah is a partner in our residential conveyancing department and is accomplished in all areas of the discipline. For more information on this topic email or call her on 0114 218 4060.

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