Lifetime ISAs guide

Alexland · 20 November 2017 at 9:11PM

The £4k contribution limit is per tax year which ends on 5th April. So you can put up to £4k in now and another up to £4k in on or after 6th April. You can make multiple deposits within the tax year if you haven't got a lump sum.

The 25% bonus relating to this tax year's contribution should be April/May and after that around a month after the contribution. So it should be possible to get to a balance of £10k + interest by May/June. The LISA needs to be open 12 months before you can use it to buy a property.

"Until 1752 the tax year in Great Britain started on 25th March, old New Year’s Day. In order to ensure no loss of tax revenue, the Treasury decided that the taxation year which started on 25th March 1752 would be of the usual length (365 days) and therefore it would end on 4th April, the following tax year beginning on 5th April.

The next difficulty was that 1800 was not a leap year in the new Gregorian calendar but would have been in the old Julian system. Therefore the Treasury moved the year start again from 5th to 6th of April, and this date has remained unchanged ever since."

http://www.ebs.ltd.uk/news/why-does-the-uk-tax-year-end-on-5th-april/

Alex

iamthesnow · 20 November 2017 at 10:58PM

Hi, why are there no high street banks offering LISAs?

eskbanker · 21 November 2017 at 1:02AM

iamthesnow wrote: »

Hi, why are there no high street banks offering LISAs?

Skipton Building Society has 87 branches, some of which are on high streets, but none of the others decided that it was worthwhile jumping through all the hoops involved in creating and maintaining a product that was presumably expected to be a fairly niche one, and by not doing so that was fairly self-fulfilling!

rachlikeswinter · 22 November 2017 at 5:34PM

Alexland wrote: »

"Until 1752 the tax year in Great Britain started on 25th March, old New Year’s Day. In order to ensure no loss of tax revenue, the Treasury decided that the taxation year which started on 25th March 1752 would be of the usual length (365 days) and therefore it would end on 4th April, the following tax year beginning on 5th April.

The next difficulty was that 1800 was not a leap year in the new Gregorian calendar but would have been in the old Julian system. Therefore the Treasury moved the year start again from 5th to 6th of April, and this date has remained unchanged ever since."

http://www.ebs.ltd.uk/news/why-does-the-uk-tax-year-end-on-5th-april/

Alex

That is SO interesting. I've often wondered why it is when it is. I thought it was to do with Spring bringing 'newness' or something :rotfl:

YellowStarling · 22 November 2017 at 11:15PM

Hi,

Not a FTB, so this is a LISA-retirement query: If I'm a higher rate tax payer but have maxed my employer contributions on my pre-tax works pension, and then have enough AVCs coming out pre-tax to take me well into the 20% income tax bracket, is it worth me chucking in an (affordable) extra £4k into a S&S LISA for £1k bonus plus natural S&S growth or chuck the same £4k into more pre-tax AVCs? Seems benefit-neutral to me unless I'm missing something, which is possibly the 100% tax-free withdrawal from the LISA vs the 25% tax-free withdrawal from my pension at age 60/55 respectively?

Bazbrown · 23 November 2017 at 9:35AM

Hi

Im new to MSE, but have been trying to find out info on the new Voluntary Right to Buy, being brought in for Housing associations (VRTB).

My question around LISA, is whether this can be used against a VRTB? as the budget yesterdaty announced an extension of the pilot scheme to the Midlands region, ready for the national roll out. So would want to get a LISA in place, for the 1 year before hand.

Thanks
Barry

pphillips · 23 November 2017 at 3:33PM

YellowStarling wrote: »

Hi,

Not a FTB, so this is a LISA-retirement query: If I'm a higher rate tax payer but have maxed my employer contributions on my pre-tax works pension, and then have enough AVCs coming out pre-tax to take me well into the 20% income tax bracket, is it worth me chucking in an (affordable) extra £4k into a S&S LISA for £1k bonus plus natural S&S growth or chuck the same £4k into more pre-tax AVCs? Seems benefit-neutral to me unless I'm missing something, which is possibly the 100% tax-free withdrawal from the LISA vs the 25% tax-free withdrawal from my pension at age 60/55 respectively?

I think what you're missing is what happens your pension when you die vs what happens to your lifetime isa when you die. You probably can't take all of the money out of your pension before you die and what you don't take out you lose but with a lifetime isa the whole amount will become part of your estate when you die. You also need to take into account that drawing from a lifetime isa is tax free, whereas drawing from a pension is a taxable earning.

Alexland · 23 November 2017 at 8:40PM

YellowStarling wrote: »

Not a FTB, so this is a LISA-retirement query: If I'm a higher rate tax payer but have maxed my employer contributions on my pre-tax works pension, and then have enough AVCs coming out pre-tax to take me well into the 20% income tax bracket, is it worth me chucking in an (affordable) extra £4k into a S&S LISA for £1k bonus plus natural S&S growth or chuck the same £4k into more pre-tax AVCs? Seems benefit-neutral to me unless I'm missing something, which is possibly the 100% tax-free withdrawal from the LISA vs the 25% tax-free withdrawal from my pension at age 60/55 respectively?

It really depends if your employer offers salary sacrifice to also save National Insurance.

If you are only saving the 20% income tax then if you have to pay income tax on 75% of the additional contributions when they turn into income in retirement (assuming your state pension and existing pension contributions use up your personal allowance) then a LISA is better as there is no tax to pay on withdrawals.

If salary sacrifice saves you both the 20% income tax and 12% national insurance then even after paying tax in retirement the benefit is roughly comparable to a LISA.

There are other considerations such as access age (LISA is higher but offers flexibility to be lower with a penalty), entitlement to benefits (LISA is considered accessable savings), fees (employers sometimes pay fees on pensions), inheritance tax planning (pension is not part of your estate and different rules apply at age 75) and if you are at risk of accumulating such a large pension pot that the lifetime allowance or paying higher rate tax in retirement become an issue.

I am using the LISA due to the risk of hitting the lifetime allowance on my pensions.

Alex

Alexland · 23 November 2017 at 9:51PM

Bazbrown wrote: »

My question around LISA, is whether this can be used against a VRTB? as the budget yesterdaty announced an extension of the pilot scheme to the Midlands region, ready for the national roll out. So would want to get a LISA in place, for the 1 year before hand.

It's a very interesting question. To be certain, as there is a small penalty if the LISA is not usable and so you then withdraw, have you tried asking a Government’s Right to Buy Agent?

https://righttobuy.gov.uk/agent-service/

Alex.

radoslaff · 27 November 2017 at 9:59AM

I've read quite a lot about LISA and I'm planning moving my and my wife's Help To Buy ISAs into new Skipton LISAs. The problem is that recently we have had quite a few searches on our credit files with a few more to come. Do they make a search when applying for LISA? In general this is not a credit product so they shouldn't, but it's just common sense not a rule.

Lifetime ISAs guide

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