Don’t miss out on a £1,000 first-time buyers’ bonus MARTIN LEWIS
THERE’S an urgent warning for first-time buyers. The new tax year starts on April 6, which means there’s just one month left to fill your Lifetime ISA allowance for this year. Miss the deadline, and you could lose out on a potential free £1,000 bonus towards your first home.
LIFETIME ISAS (LISAS)
LAUNCHED in 2017, they were a replacement for its Help to Buy ISA predecessor cousin. LISAs are a tax-free savings account which lets you save up to £4,000 per tax year. For a detailed explanation and how it compares to the Help to Buy ISA see my full mse.me/ lifetimeISA guide, but in a nutshell…
It’s for first-time buyers... As long as you’ve never owned, or part owned a home (in any way) you can use the money as a deposit towards any residential property that costs up to £450,000.
… or for retirement savings. The money and bonus can be taken out once you hit 60.
For every pound you contribute in a year, the state will add 25%, until you’re 50. So, if you save the full £4,000, you’ll have £5,000. That means if you fill this year’s now, and you had another £4,000 to save you could put that in on April 6– so you’d have £8,000 in by then.
There’s a penalty if you withdraw cash for anything else. You can withdraw money as you want, but if it’s not for the property – or at retirement – there will be a 25% penalty (you’ve already had a 25% bonus). So for every £100 you put in, you get £93.75 back, so only put in money you’ll use for retirement or a home.
If you want a LISA sort it soon, so you can use this year’s allowance now, and get another one on April 6.
Sadly though, LISAs aren’t available to everyone. You must be aged 18 to 39 to open one. Yet as long as you open it the day before you’re 40 you can then continue to use it afterwards.
The other issue is that to use the bonus for a home, you need to have had it open for at least a year. So, anyone considering it should at least put in £1 now, as that starts the clock ticking. Of course, if you can save more, then do.
The number of providers offering LISAs is limited. There are two types of LISAs – cash and stocks and shares. Not many providers offer cash LISAs, but top is app-based moneyboxapp. com which pays 1.4% AER followed by the branch and online thenottingham. com building society paying 1.25% AER.
There are more choices with an investment (stocks and shares) LISA including the likes ofhl.co.uk and nutmeg. com. Though remember with these you’re taking a risk, and they are far less suitable for anyone using the money within five years.
If you opened a Help to Buy ISA before they closed for new applications last November, you can keep saving until November 2029 and use it for the 25% house bonus until December 2030.
If you didn’t open a H2B ISA then it’s a question of just putting your money in the best savings accounts.
For regular saving you can put up to £500/month in the coventrybuildingsociety.co.uk regular saver earning 2.5% AER.
Or, for lumps with easy access there’s marcus.co.uk and saga.co.uk 1.3% AER.