The government wants to encourage saving for the whole of the working population, whether for eventualities, to get onto the property ladder, towards retirement, or just to encourage individuals and families to start planning for a wealthier, less precarious future. Available from 6 April 2017, the new Lifetime Isa (LISA) is designed to encourage people to put aside money each month.
The new LISA will become available for savers between the age of eighteen and forty from 6 April 2017. With this account, it will be possible to invest a maximum of £4,000 p.a.
Individuals between eighteen and forty can invest a maximum of £4,000 a year in a LISA; investments made before age fifty will get a 25% bonus.
The investment funds should not be withdrawn before the age of sixty, because the saver will forfeit the bonus and incur a 5% tax charge, whereas withdrawals after the age of 60 will be tax-free.
How the funds are used is up to the saver, for example, it could be used by a first time buyer, or a combined first-time buyer account (two first time buyers in a civil partnership or married) to save towards a deposit for a property worth up to £450,000.
It is possible to transfer the Help-to-Buy ISA to a LISA, but having both a Help-to-Buy ISA and a LISA is not allowed. This means that it is essential to weight up the benefits of the two specifically in line with personal circumstances.
The question of the benefits of these recent and newly introduced schemes is very much to do with individual circumstances. There is discussion among financial pundits about whether the LISA is the first move towards the long-term reform of the pensions system, but this is yet to become evident, because the chancellor did not make any comment about pension reform in the Spring Budget 2016.
For more information on the Help to Buy ISA visit the DNS website, there are plenty of articles there about these top-up schemes, pensions, and other ways to save in investments, and many tips about how to claw back precious income through careful tax planning.
If you’re thinking about investments, whether from 6 April 2016, 2017, or if you think you might be eligible for the Help to Save scheme <link to Help to Save> being introduced from 6 April 2018, then make sure you speak to your account manager. You must make an informed decision about these incentives; for example, you might decide to take advantage of tax relief on pension contributions rather than invest in any of these ISA-related schemes.
Any questions? Schedule a call with one of our experts.
Sumit Agarwal Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.
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