You may have seen the new Lifetime ISAs when they were announced in the March 2016 budget. We commented on this back on 17 March 2016.
For every £40 you put in, the government will put in another £10. The account then attracts tax free interest on top of the £50. There is also no tax charge when you take the money out (unlike a pension).
Lifetime ISAs are limited to one per person; you must be 18 to 40 to open one; maximum £4,000 invested (topped up to £5,000) per year; no minimum or regular saving required.
The account holder has to use the funds to either buy a first home by the time they are 50 OR withdraw the lot when they are 60. Effectively the money can only be used for either of these purposes.
If the account holder uses the money for anything else (i.e. takes the money out before they are 60 and doesn’t use it for first home) the penalties are quite harsh. They lose all the top up, all the interest accrued on the account and pay 5% surcharge.
As with all of our tax tips and web pages this information is necessarily summarised and of a general nature. If you would like detailed specific advice please contact us.