Using a Lifetime ISA for your first home

What type of property can I buy with a Lifetime ISA?

If you use the Lifetime ISA to save for buying your first home, it must be:

  • £450,000 or less
  • your first property, or interest/share in a property in the UK
  • for you to live in, i.e. it can’t be a buy-to-let property.

When can I access my savings to buy my home?

Your Lifetime ISA must be open for at least 12 months before you can withdraw funds from it to buy your first home.

I want to buy my first home before 5th April 2018. Should I use a Lifetime ISA to save for my deposit?

We wouldn’t recommend you do so. Due to scheme technicalities, the government bonus for the first year will only be paid after the end of the tax year (5th April 2018).

So, if you buy your home before then, and saved for your deposit through the Lifetime ISA, you wouldn’t receive the government bonus as you’d need to withdraw your savings before the bonus is applied.

I want to buy my first home within the next three to five years. Should I open a cash, or stocks and shares, Lifetime ISA?

The type of Lifetime ISA you choose will depend on your attitude to risk and reward.

However, as investments are for the longer term, if you plan to buy your first home within the three years you should probably open a cash Lifetime ISA.

If you’re planning to buy your first home in more than three years time, you may want to consider a stocks and shares Lifetime ISA. Investing in stocks and shares offers the possibility of better returns in the long run and could help you reach your goal faster. However, remember that your capital is at risk and the value of your investment can go down as well as up.

Can I use the Lifetime ISA to use as a deposit for a shared ownership property?

Yes you can, but the overall value of the house can’t exceed the £450,000 limit.

I already own property in another country — can I use the Lifetime ISA to buy my first property in the UK?

No. If you already own, or part-own, property anywhere else in the world you can’t use the Lifetime ISA to save for a deposit to buy property in the UK.

A Lifetime ISA may not be right for everyone

As with all investing, your capital is at risk. Tax rules may change in the future. If you are unsure if a Lifetime ISA is the right choice for you, please seek independent financial advice.

  • You must be 18–39 years old to open one.
  • If you need to withdraw the money before you’re 60, and it’s not for the purchase of a first home up to £450,000, or a terminal illness, you’ll pay a 25% government penalty. So you may get back less than you put in.
  • Compared to a pension, the Lifetime ISA is treated differently for tax purposes. You may be better off contributing to a pension.
  • If you choose to opt out of your workplace pension to pay into a Lifetime ISA, you may lose the benefits of the employer-matched contributions.