SAY HELLO TO YOUR LIFETIME INDIVIDUAL SAVINGS ACCOUNT (LISA)

Saving for your first home tax-efficiently

IF YOU ARE planning to use a Lifetime Individual Savings Account (LISA) towards your property purchase, you must be a first-time buyer. A LISA is a savings account that can be opened if you are aged between 18 and 39. You can save up to your annual LISA allowance (currently £4,000). Proceeds are free of tax and the government will pay a 25% bonus on your contributions, currently up to a maximum of £1,000 a year. The home you buy must have a price of £450,000 or less, be the only home you will own in the UK where you intend to live and be purchased with a mortgage.

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INDIVIDUAL ELIGIBILITY CRITERIA

If you plan to buy a home with someone else who is also a first-time buyer, you can each open and save money into your own LISA account. You must both meet the individual eligibility criteria. You can open more than one LISA during your life, but you can only open one in each tax year and put money into one in each tax year. Your LISA allowance forms part of your overall annual ISA allowance (currently £20,000 in tax year 2021/22). You can use your Lifetime ISA with other government schemes as long as you meet the eligibility requirements of the other schemes you wish to participate in.

TOWARDS AN EXCHANGE DEPOSIT

Any withdrawals within the first 12 months of your first payment into a LISA will incur a 25% government withdrawal charge (2021/22 tax year), which could mean you would get back less than you paid in. A withdrawal charge does not apply when a withdrawal is made to buy a first home or the investor has a terminal illness. After the first 12 months, you can withdraw money to buy your first home, but for any other withdrawals before the age of 60, the government withdrawal charge will apply. LISA funds, including the bonus, can be put towards an exchange deposit, provided the property purchase is completed within 90 days of your conveyancer receiving the withdrawn funds from your LISA provider.

PURCHASE FALLS THROUGH

If it’s taking longer than 90 days for your property purchase to go through, your conveyancer can write to HM Revenue & Customs for an extension. If the purchase falls through, or you don’t use the cash to buy your home within three months after the withdrawal, the money must be returned to the LISA by the conveyancer. There is no restriction on which stage of the property purchase you can put your LISA funds towards. If it meets the conditions above, you will be able to put them towards a deposit at exchange of contracts.

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>> LOOKING FOR ADVICE TO PURCHASE YOUR FIRST HOME? <<

Looking to take advantage of the government bonus added to any money you save in a LISA towards purchasing your first home? For further information about how we can help, contact - UK +44 (0) 203 883 1017 Hong Kong +852 6017 4140 – email info@cedar-crest.co.uk

Your home may be repossessed if you do not keep up repayments on your mortgage.