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LIFETIME ISAS

Lifetime ISAs, children, and inheritance tax

Can I contribute to my child’s Lifetime ISA?

Yes, you can contribute to your child’s, grandchild’s or anyone else’s Lifetime ISA.

Lifetime ISAs can be a great way of providing a nest egg for your children or grandchildren while you are still living. They are less accessible than a traditional ISA, and so offer some built-in protection from unwise spending.

What are the inheritance rules?

The inheritance rules for the Lifetime ISA are the same as all other types of ISA.

Can I minimise inheritance tax by paying into a Lifetime ISA?

Potentially yes, if you set up your contributions to someone’s Lifetime ISA as regular payments and they’re regarded as gifts for inheritance tax purposes. For more information, read our article how to (almost) double your children’s inheritance.

Open a Lifetime ISA

A Lifetime ISA may not be right for everyone

As with all investing, your capital is at risk. The tax treatment depends on individual circumstances and may be subject to change in the future. If you are unsure if a Lifetime ISA is the right choice for you, please seek 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 have to pay a 25% government withdrawal charge (the withdrawal penalty will be temporarily reduced from 25% to 20% from 6 March 2020 till 5 April 2021 due to coronavirus) meaning you’ll get back less than you’ve 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.

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