Lifetime ISAs guide

eskbanker

thelawnet said:

• there is a serious error in the first line of the introduction.

"A Lifetime ISA (LISA) can be opened by anyone aged between 18 and 39."

In fact you must be

• a UK resident, or a member of the armed forces serving overseas, or their spouse/civil partner

You are a UK resident if you have been in the UK for 183 days in the current tax year.

Since the tax year ends on April 5, someone who moves to the UK and doesn't leave in early October will become entitled to a LISA before the new tax year on April 6.

You will also become UK resident if:

• 'you have a home in the UK' (which means a home you own, rent or staying with family) which you have been in for 30+ days in the current tax year AND
• you've had that specific home for 91+ days (whether in one tax year or spanning two) AND
• you've been in that specific home for 30+ consecutive days in the current tax year AND
• EITHER have no overseas home OR spend no more than 30+ days in the current tax year.

'No overseas home' is satisfied if you can't reside in your overseas home - e.g., if you own a property in India but move to the UK, renting out the property to another, then you no longer have an overseas home, and after 91 days will become a UK resident.

You are also a resident on the basis of working full-time for any consecutive 365+ days in the UK.

Not sure it's really 'serious' but yes, for completeness the article should make it clear that it's only referring to LISA-specific conditions, and that anyone looking to open any ISA needs to be a UK resident, as defined by the government:

Who can open an ISA

You must be:

• 16 or over for a cash ISA
• 18 or over for a stocks and shares or innovative finance ISA
• 18 or over but under 40 for a Lifetime ISA

You must also be either:

• resident in the UK
• a Crown servant (for example diplomatic or overseas civil service) or their spouse or civil partner if you do not live in the UK

https://www.gov.uk/individual-savings-accounts

frogmouth

I'd like some clarification - I see that two people can use their LISAs to buy one house if they are both eligible, but I am hoping to buy with my spouse, and I have a h2b ISA. If my spouse opens a LISA would I be able to use my h2b and get that bonus as well as them using the LISA to get the LISA bonus? I can only find info about using two of the same, or one or the other on your own, not both.

If we can't do that then it strikes me I should open a LISA and split my h2b balance between the two of us for max benefit....

masonic

You can use both if the purchase meets both sets of scheme rules.

Superjko

Can I just check this….
£4000 investment get 25% from government 
do I continue you get 25% year after year on this £4000 or do I then have to deposit another £4000 each year to receive the 25% government. 

So £4000 each year deposited to receive government max £1000 (25%)

eskbanker

Superjko said:

Can I just check this….
£4000 investment get 25% from government 
do I continue you get 25% year after year on this £4000 or do I then have to deposit another £4000 each year to receive the 25% government. 

So £4000 each year deposited to receive government max £1000 (25%)

The 25% is added once to each contribution made.

Jetstar222

Hi All,

I'm trying to understand LISA's and their restrictions better and hope you can shed some light.

1. I understand a first time purchase must be used as a main residence. If however my situation changes (because life, i.e. marriage, kids, divorce, change of heart etc.), is there a minimum term before selling, even if within the year?

2. If I cannot use the LISA for the full amount, or buy a house over the £450k, or withdraw early because I need the money, do I get back less money than I put in with the 25% government penalty?

3. Can a LISA be used on auction properties? If so what is the typical release time for that money?

4. Can a LISA be used on cash purchases? e.g. if i win the lottery or get inheritance etc? without a mortgage. Is there a workaround (i.e. offset mortgage or bridging loan)

Thanks in advance!

eskbanker

Jetstar222 said:

Hi All,

I'm trying to understand LISA's and their restrictions better and hope you can shed some light.

1. I understand a first time purchase must be used as a main residence. If however my situation changes (because life, i.e. marriage, kids, divorce, change of heart etc.), is there a minimum term before selling, even if within the year?
No published minimum term as such, as long as you move into the property as your main residence after purchasing.

2. If I cannot use the LISA for the full amount, or buy a house over the £450k, or withdraw early because I need the money, do I get back less money than I put in with the 25% government penalty?
Yes, the 25% withdrawal penalty effectively represents a 6.25% deduction from what you paid in, ignoring any growth or interest.

3. Can a LISA be used on auction properties? If so what is the typical release time for that money?
I don't believe that there's anything inherent about auction properties that would prevent use of a LISA.  LISA managers have up to 30 days to release the account balance to the conveyancer.

4. Can a LISA be used on cash purchases? e.g. if i win the lottery or get inheritance etc? without a mortgage. Is there a workaround (i.e. offset mortgage or bridging loan)
No, LISA-funded purchases must be supported with a mortgage.

Thanks in advance!

Answers inline above....

Jetstar222

eskbanker said:

Jetstar222 said:

Hi All,

I'm trying to understand LISA's and their restrictions better and hope you can shed some light.

1. I understand a first time purchase must be used as a main residence. If however my situation changes (because life, i.e. marriage, kids, divorce, change of heart etc.), is there a minimum term before selling, even if within the year?
No published minimum term as such, as long as you move into the property as your main residence after purchasing.

2. If I cannot use the LISA for the full amount, or buy a house over the £450k, or withdraw early because I need the money, do I get back less money than I put in with the 25% government penalty?
Yes, the 25% withdrawal penalty effectively represents a 6.25% deduction from what you paid in, ignoring any growth or interest.

3. Can a LISA be used on auction properties? If so what is the typical release time for that money?
I don't believe that there's anything inherent about auction properties that would prevent use of a LISA.  LISA managers have up to 30 days to release the account balance to the conveyancer.

4. Can a LISA be used on cash purchases? e.g. if i win the lottery or get inheritance etc? without a mortgage. Is there a workaround (i.e. offset mortgage or bridging loan)
No, LISA-funded purchases must be supported with a mortgage.

Thanks in advance!

Answers inline above....

Many thanks for the prompt response! Two follow up questions:

- Nutmeg guidance currently states 25% withdrawal penalty from the withdrawn amount which is slightly different from the 6.25% you mention for my cash deposit.

If over time I have put in my LISA £16k cash, £4k govt bonus and £2.2k investment income (total £22.2k) which of the following is the amount I get back if I withdraw:

a) £22.2k * 0.75 = £16.65k

b) 6.25% off the £16k cash = £15k + £4k + £2.2k = £21.2k

c) 6.25% off the £16k cash + loss of govt bonus = £15k + £2.2k = £17.2k

d) another amount?

- Can a bridging loan, standard mortgage (small amount) or a offset mortgage be a valid workaround? (ignoring the auction applied time restrictions) 

It's ridiculous that a FTB can be penalised for saving for so long then be hit with a withdrawal penalty just because of the method of purchase. It's fair if the penalty was just loss of the govt bonus but then to turn around and take the bonus away as well as a portion of the saved cash amount (and/or the investment income) is unjust!

eskbanker

Jetstar222 said:

- Nutmeg guidance currently states 25% withdrawal penalty from the withdrawn amount which is slightly different from the 6.25% you mention for my cash deposit.

No, that's saying the same as I am (albeit I perhaps wasn't explicit enough that it's loss of bonus as well as the 6.25%) - if you pay in £100, boosted to £125 via the bonus, and then withdraw, the withdrawal penalty of 25% of the amount withdrawn, i.e. £125, is £31.75, leaving a net £93.75, so 6.25% less than was paid in.

Jetstar222 said:
If over time I have put in my LISA £16k cash, £4k govt bonus and £2.2k investment income (total £22.2k) which of the following is the amount I get back if I withdraw:

a) £22.2k * 0.75 = £16.65k

b) 6.25% off the £16k cash = £15k + £4k + £2.2k = £21.2k

c) 6.25% off the £16k cash + loss of govt bonus = £15k + £2.2k = £17.2k

d) another amount?

As above, it's 25% of the withdrawn amount, so if you withdraw the full £22.2K then the answer is a.

Jetstar222 said:
- Can a bridging loan, standard mortgage (small amount) or a offset mortgage be a valid workaround? (ignoring the auction applied time restrictions) 

I don't believe a bridging loan would qualify, but the others should, as they're mortgages.

Jetstar222 said:
It's ridiculous that a FTB can be penalised for saving for so long then be hit with a withdrawal penalty just because of the method of purchase.

The scheme is intended to assist those who need help getting onto the property ladder, and those who'd be buying in cash, with no mortgage support, aren't deemed to be sufficiently in need of help.

Jetstar222 said:
It's fair if the penalty was just loss of the govt bonus but then to turn around and take the bonus away as well as a portion of the saved cash amount (and/or the investment income) is unjust!

The issue of how the withdrawal penalty is calibrated has been discussed endlessly, and Martin Lewis believed that he'd secured a government concession on that but was unsuccessful:

https://forums.moneysavingexpert.com/discussion/6507861/mse-news-martin-lewis-is-a-lifetime-isa-win-coming-in-the-budget

Elisa42

My daughter is buying a 30% share of a house that is being sold for £595,000. She has had a H2B ISA and latterly a LISA. Can she use her LISA towards her deposit to buy her share of the house, as her share is £178,500? The people she is buying with are not first-time buyers, but she is.
Any advice would be greatly appreciated.