Young savers can save £4,000 per annum and get 25% bonus from the government.
Up to £4,000 can be saved each year. The government will pay in a 25% bonus on these contributions at the end of the tax year.
Savers will be able to make Lifetime ISA contributions and receive a bonus from the age of 18 up to the age of 50.
Tax free funds, including the government bonus, can be used to buy a first home worth up to £450,000 at any time from 12 months after opening the account. The funds, including the government bonus, can be withdrawn from the Lifetime ISA from age 60 for any other purpose.
Individuals will be able to transfer savings from other ISAs as one way of funding their Lifetime ISA. In line with existing rules, transfers from previous years’ ISA contributions do not affect that year’s £20,000 overall ISA limit. During 2017/18 only, additional transfers may be made and matched from the Help to Buy ISA.
The Help to Buy ISA will be open for new savers until 30 November 2019, and open to new contributions until 2029. Savers will be able to save into both a Help to Buy ISA and a Lifetime ISA, but will only be able to use the government bonus from one of their accounts to buy their first home.
Full or partial withdrawals can be made from age 60 and used for any purpose and will be free of tax. Funds may remain invested and any interest and investment growth will be tax-free.
Tax free withdrawals will also be allowed where people are diagnosed with terminal ill health.
Upon the death of the account holder, the funds will form part of the estate for inheritance tax purposes. Their spouse or civil partner can also inherit their ISA tax advantages and will be able to invest as much into their own ISA as their spouse used to have, on top of their usual allowance.
The total amount which can be saved each year into all ISAs will increase from £15,240 to £20,000 from April 2017. Therefore if someone saves £4,000 in a Lifetime ISA in 2017/18 that person will also be able to save up to £16,000 in other ISAs in that year.
Article from ACCA In Practice