From 6 April 2016 there will now be the new Lifetime ISA (Individual Savings Account)available to anyone aged between 18 and 40.
You can put up to £4,000 into it each year. Up to age 50 any amount you put in will have a further 25% bonus added by the Government. For example, if you put in the full £4,000, the Government will add £1,000 at the end of the tax year, so you would have £5,000 in your Lifetime ISA. You can invest the money in cash or in stocks and shares.
This Lifetime ISA is meant to be a tool either for buying a first home or for use to help fund retirement from age 60. You can withdraw money at any time, but if it is withdrawn before age 60 and is not used to buy a first property, it will suffer a 25% penalty – in effect it is the Government taking back its bonus. From age 60 onwards you can take money out as you wish and it is not subject to tax. You can have a Lifetime ISA for up to £4000 per year if you qualify age-wise (18 to 40). It will count towards your total annual ISA allowance from next April of £20,000.
There is an ISA Helpline – 0300 2003312 – for those with questions about the Lifetime ISA or the other ISAs available. It is becoming rather complicated and it is good to have a point of contact to get questions answered.
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