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Everything you need to know about ISAs

What is a Lifetime ISA?

The purpose of lifetime ISAs is to invest in buying your [first] property or for saving for later in life. You need to be between the ages of 18-40 in order to qualify for a lifetime ISA, and a resident of the UK. The yearly limit for how much you can pay into your lifetime ISA (LISA) account, is £4,000. Although you need to be between 18-40 years old to set up a LISA, you can pay into the account up until the age of 50.

It is important to note that the £4,000 LISA limit counts towards the annual £20,000 ISA limit.

How is a Lifetime ISA invested?

Lifetime ISAs can have a cash focused or in stocks and shares. Cash savings enables you to receive interest, and the stocks and shares ISAs allow you to share investment and growth.

The money you put into a LISA a year can be as lump sum or simply putting away the money as and when you want to.

Following this, the state will add a 25% bonus. This bonus is paid every year until you are 50. After you turn 50, you are no longer able to pay into your LISA account; you will no longer receive the bonus either. Your LISA account will stay open and will still earn interest as well as claim any investments returns.

The bonus only applies to contributions and excludes interest, as well as stocks and shares. The limit of the bonus is £33,000. If you are [born] April 6, then the max is £32,000.

What is a Lifetime ISA, used for?

LISA funds can be used when buying your [first] property then the property will cost £450,000 or less. The property will need to be bought following at least 12 months of [you] having opened a LISA account. You will then need a conveyancer or solicitor to act on your behalf. The ISA provider will then pay the funds directly to whoever is working on your behalf.

Things to remember when setting up a LISA account.

There is a 25% charge to withdraw cash or assets from a LISA. This does not apply if you are:

  • Buying your first home
  • Aged 60 or over
  • Terminally ill, with less than 12 months to live

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