Lifetime ISA - confused if I take out 'growth' without touching capital?

Lysimache · 19 June 2018 at 3:59PM

Hi!

Lifetime Stock and Shares ISA in a homeowner i.e. can only take out at 60.

Suppose I don't want to touch my capital nor the Government bonus. I just want to take out the growth in shares or any dividend income.

E.g. I've put in £10,000 over the years.
Govt has put in £2,500 over the years.

My shares have since produced £5000 growth and £1000 dividend.

Total in ISA is £6000 + £12,500

If I don't touch the £12,500, can I take out £6,000 without penalty? Or is there a penalty even if I just want to take out the dividend or capital growth?

eskbanker · 19 June 2018 at 4:16PM

As a homeowner, there's a penalty for any withdrawal from a Lifetime ISA before 60, as per https://www.gov.uk/guidance/lifetime-isas-for-isa-managers#with-dr:

Non-Life events

In the 2018 to 2019 tax year and all subsequent tax years, withdrawals which do not result from a life event will be subject to a 25% withdrawal charge. This includes withdrawals of growth, interest or government bonus from the Lifetime ISA.

Life events are limited to:
after the investor has reached 60

on the death or terminal illness of the investor, and

from 6 April 2018, withdrawals for a first time residential purchase subject to the conditions being met

Lysimache · 19 June 2018 at 4:16PM

I also wonder if I can ask for any dividend income to be paid outside the ISA as soon as it is generated outside the Lifetime ISA. That would allow me to get some income before 60 without touching the capital or Govt bonus.

Lysimache · 19 June 2018 at 4:17PM

eskbanker wrote: »

As a homeowner, there's a penalty for any withdrawal from a Lifetime ISA before 60, as per https://www.gov.uk/guidance/lifetime-isas-for-isa-managers#with-dr:

Aha, so it includes growth/interest withdrawals. Thanks.

Guess that means a provider can't apportion the Dividend outside the ISA either without a penalty?

Alexland · 19 June 2018 at 4:41PM

No the dividends stay inside the LISA or it would count as a withdrawal. Nice try.

eskbanker · 19 June 2018 at 5:37PM

Lysimache wrote: »

That would allow me to get some income before 60 without touching the capital or Govt bonus.

If you think you might not be able to afford to leave all of that money committed then you can scale back your contributions a bit (up to 50 when they stop).

Or from your OP figures, you could look at the £1500 penalty for withdrawing £6K as leaving you with 'only' £7K on top of your original £10K!

Lifetime ISA - confused if I take out 'growth' without touching capital?

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