2016 Budget - ISA changes

Jonnybgood

account needs to be open 12 months before you can claim a bonus but after that you can pay in £4,000 and receive it straight away.

So theoretically I could pay in £8000 in 13 months and receive £2000 in bonuses? And on top of that, gain a bonus on my current Home Saver ISA if I transfer it to the Lifetime ISA during 2017/18...

masonic

SkyeKnight wrote: »

With this they are saying some people can get 10 years of free money all through their forties and other people can't get the same thing at exactly the same age. It would make sense if the cut-off date was 50 because no-one is allowed to contribute in their fifties. Seems weird to me.

I wouldn't say weird, I'd say ominous. Perhaps those who will be over 40 at the time this is launched will escape some terrible fate being plotted and yet to be revealed...

someone

Interesting to note that £4000 is not divisible 12, something that ISA limits have usually considered. Could this mean that it will be structured the same as HTB with a £1000 lump sum but with a £250 monthly payment (as £3000 does divide by 12).

colsten

someone wrote: »

Interesting to note that £4000 is not divisible 12, something that ISA limits have usually considered. Could this mean that it will be structured the same as HTB with a £1000 lump sum but with a £250 monthly payment (as £3000 does divide by 12).

there is no maximum monthly contribution – you can save as little or as much as you want each month, up to £4,000 a year

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508117/Lifetime_ISA_explained.pdf

Moby_Tide

masonic wrote: »

I wouldn't say weird, I'd say ominous. Perhaps those who will be over 40 at the time this is launched will escape some terrible fate being plotted and yet to be revealed...

I'm just over the age limit but the cynic in me says that this is the perfect way to scrap higher rate tax relief on those eligible for the bonus. on average people tend to be earning the most in their 40s/50s and most likely to be in a higher band so then it starts recouping what was paid out whilst they were in their 20s/30s. They could even go all the way and scrap any tax relief

Anyone 40+ still then has 25 years or so under the old rules as the govt tax relief contributions will then diminish

juststuff123

Hmmm the 25% thing seems a bit misleading to me. 25% in the first year sure, but in the second year you'll have a max of £9000 & the bonus of £1000 will be 11% of your fund. By the time you're 15yrs in the £1000 bonus on a pot of £75,000 is just 1.35%. So in reality for most of the time you'll be relying on the regular interest rate of the ISA, and ISA rates at the moment are awful so it's a big gamble.

masonic

juststuff123 wrote: »

Hmmm the 25% thing seems a bit misleading to me. 25% in the first year sure, but in the second year you'll have a max of £9000 & the bonus of £1000 will be 11% of your fund. By the time you're 15yrs in the £1000 bonus on a pot of £75,000 is just 1.35%. So in reality for most of the time you'll be relying on the regular interest rate of the ISA, and ISA rates at the moment are awful so it's a big gamble.

Yes, but only if you choose to hold cash. It seems S&S will be allowed within the lifetime ISA. So you get a one time 25% bonus - equivalent to basic rate tax relief.

veryintrigued

juststuff123 wrote: »

Hmmm the 25% thing seems a bit misleading to me. 25% in the first year sure, but in the second year you'll have a max of £9000 & the bonus of £1000 will be 11% of your fund. By the time you're 15yrs in the £1000 bonus on a pot of £75,000 is just 1.35%. So in reality for most of the time you'll be relying on the regular interest rate of the ISA, and ISA rates at the moment are awful so it's a big gamble.

Have not seen any mention of the portability of this product yet.

i.e. I'm assuming that it'll work much the same as Mini cash ISAs in that providers will offer fixed and variable options and you could have lots of 'Lifetime ISA' pots all over the place.

smichr

juststuff123 wrote: »

Hmmm the 25% thing seems a bit misleading to me. 25% in the first year sure, but in the second year you'll have a max of £9000 & the bonus of £1000 will be 11% of your fund. By the time you're 15yrs in the £1000 bonus on a pot of £75,000 is just 1.35%. So in reality for most of the time you'll be relying on the regular interest rate of the ISA, and ISA rates at the moment are awful so it's a big gamble.

I'd understood it as 25% every year, am I wrong?

Ie year 1, £4000 from me + £1000 bonus = £5000, year 2, total £10,000 etc?

Also, I'll be 25 when this scheme launches, already have a mortgage - the 25% bonus sounds great but what guarantee is there in 35 years time I will get my potential bonus of £35,000 (it won't be that much in reality, £4k a year is impossible at present)? I don't know if I trust Governments enough for that. Heck, ISA's only launched in 1999.

jamesd

Nekaro wrote: »

"if you take the money out before you're 60 without buying a first home, you get no bonus and there's a 5% penalty on the amount you withdraw"

"When withdrawing money, any bonus for that tax year will be paid at the point of withdrawal".

Both are right. You keep the government bonus and get the money in any of these three cases:

1. You use it to buy a first home worth up to £450k. the money is paid to the conveyancer and can be repaid to the ISA if the transaction doesn't complete.
2. You are diagnosed with a medical condition with a life expectancy of up to one year.
3. You are 60 or older.

The 5% charge applies if you withdraw in any other situation.

This may change later, there is to be consultation on other life events and the potential to borrow secured on the ISA.