Posts Tagged ‘ISAs’

Lifetime ISAs

Monday, February 20th, 2017

A reminder that from 6 April 2017 Lifetime ISAs are available as an alternative tax-free investment.

The lifetime Individual Savings Account (ISA) is a longer term tax-free account that receives a government bonus.

Details published 17 February 2017 are:

You can open a lifetime ISA if you are aged 18 or over but under 40. You must be either:

  • resident in the UK
  • a Crown Servant (for example a diplomat or civil servant)
  • the spouse or civil partner of a Crown Servant

As with other ISAs, you won’t pay tax on any interest, income or capital gains from cash or investments held within your lifetime ISA.

Saving in a lifetime ISA

You can save up to £4,000 each year in a lifetime ISA. There is no maximum monthly savings contribution, and you can continue to save in it until you reach 50. The account can stay open after then but you can’t make any more payments into it.

The £4,000 limit, if used, will form part of your overall annual ISA limit. From the tax year 2017 to 2018, the overall annual tax limit will be £20,000.

For example, you could save:

  • £11,000 in a cash ISA
  • £2,000 in a stocks and shares ISA
  • £3,000 in an innovative finance ISA
  • £4,000 in a lifetime ISA in one tax year

Your lifetime ISA won’t close when the tax year finishes. You’ll keep your savings on a tax-free basis for as long as you keep the money in your lifetime ISA.

Lifetime ISAs can hold cash, stocks and shares qualifying investments, or a combination of both.

Government bonus

When you save into your lifetime ISA, you will receive a government bonus of 25% of the money you put in, up to a maximum of £1,000 a year.

Withdrawals

You can withdraw the funds held in your lifetime ISA before you’re 60, but you’ll have to pay a withdrawal charge of 25% of the amount you withdraw.

A withdrawal charge will not apply if you are:

  • using it towards a first home
  • aged 60
  • terminally ill with less than 12 months to live

If you die, your lifetime ISA will end on the date of your death and there won’t be a withdrawal charge for withdrawing funds or assets from your account.

Transferring a lifetime ISA

You can transfer your lifetime ISA to another lifetime ISA with a different provider without incurring a withdrawal charge. If you transfer it to a different type of ISA, you will have to pay a withdrawal charge.

Saving for your first home

Your lifetime ISA savings and the bonus can be used towards buying your first home, worth up to £450,000, without incurring a withdrawal charge. You must be buying your home with a mortgage.

You must use a conveyancer or solicitor to act for you in the purchase, and the funds must be paid direct to them by your lifetime ISA provider.

If you are buying with another first time buyer, and you each have a lifetime ISA, you can both use your government bonus. You can also buy a house with someone who isn’t a first time buyer but they will not be able to use their lifetime ISA without incurring a withdrawal charge.

Your lifetime ISA must have been opened for at least 12 months before you can withdraw funds from it to buy your first home.

If you have a Help to Buy ISA, you can transfer those savings into your lifetime ISA or you can continue to save into both – but you will only be able to use the government bonus from one to buy your first home.

Transferring ISAs

Monday, July 4th, 2016

ISA investors may be interested to read the following guidance issued by HMRC regarding the transfer of ISAs from one provider to another.

What you can transfer

You can transfer a cash ISA to another cash ISA with a different provider. You can do the same with stocks and shares ISAs. You can also transfer a cash ISA to a stocks and shares ISA or vice versa.

If you want to transfer money you’ve invested in an ISA this current year, you must transfer all of it. For previous years, you can choose to transfer all or part of your savings.

Check with your provider for any restrictions they may have on transferring ISAs. They may also make you pay a charge.

How to transfer your ISA

To switch providers, contact the ISA provider you want to move to and fill out an ISA transfer form to move your account. If you withdraw the money without doing this, you won’t be able to reinvest that part of your allowance again.

Deadlines and complaints

ISA transfers should take no longer than:

  • 15 working days for a cash ISA
  • 30 working days for a stocks and shares ISA

If your transfer takes longer than this, contact your ISA provider. If you’re unhappy with the response, you can take the matter up with the Financial Ombudsman Service.

Financial Ombudsman Service
Telephone: 0845 080 1800
Monday to Friday, 8am to 8pm
Saturday, 9am to 1pm

 

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