Hills Financial Planning


Who wouldn’t want £1,000 free money every year?

29th May 2020


Who wouldn’t want £1,000 free money every year?

If you are age 18-40 (or a parent or grandparent of someone age 18-40), you can benefit from £1,000 free money each year by setting up a Lifetime ISA to which you can contribute up to £4,000 per year until age 50.  Every time you contribute, 25% tax relief i.e free money will be added. So if you contribute £4.000, the government will make this up to £5,000. If you do this every year from 18 to 50, you could get £32,000 free money!

 

 

 

 

 

 

 

There are cash and investments types of Lifetime ISAs. Any interest or dividends earned in your Lifetime ISA are free from Income Tax and any profits are free from Capital Gains Tax.

Sounds good doesn’t it? But there is a catch! You must use your Lifetime ISA to purchase your first home or for retirement from age 60. If you use your Lifetime ISA towards your first home or retirement, you can withdraw all of the funds completely tax free. But if you withdraw from your Lifetime ISA for any other reason, there is a penalty which could leave you with less than you started with! This penalty is usually 25% but has temporarily been reduced to 20% for chargeable withdrawals between 6 March 2020 and 5 April 2021.

So if you are saving for your first home or for retirement a Lifetime ISA is a great place to do it and get a boost of free money. Parents and Grandparents who wish to help younger generations get on the property ladder or put in place provision for their retirement, a Lifetime ISA could be a good option. But if you are saving for anything else, a Lifetime ISA isn’t the right option for you. 

For more information, please do not hesitate to contact us.

 



By Helen Tweed - Chartered Financial Planner, 29th May 2020

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