Tax year end 2018 and your Lifetime ISA

When is the end of the Tax Year?

The current tax year (2017/18) ends at midnight on April 5th.

What impact does this have on my Lifetime ISA?

We’ll apply to HMRC for a 25% top-up on the amount you contributed to your LISA before April 6th 2018. If you want to contribute the £4,000 maximum for the tax year, you need to do so before midnight on 5th April.

Do I need to do anything to receive the government bonus for my Lifetime ISA?

No you won’t need to take any action. We’ll submit your contributions to HMRC at the end of the tax year and then your bonus will be applied to your Nutmeg account.

When will the government bonus be paid?

We will apply to HMRC for your bonus from 6th April, however as this is the first time the government bonus will be paid, we are unsure how long it will take to be processed by HMRC. We will keep you informed of the progress of the payments.

Will the bonus be paid directly into my Lifetime ISA? How will it be invested?

Your bonus will be paid directly into your LISA account. We’ll then invest the new funds automatically in line with your selected risk level on your Lifetime ISA pot. This will happen within two working days of the bonus arriving.

Do I have to pay tax on the 25% government bonus?

No. Lifetime ISAs are tax-free savings accounts, which means you will not have to pay any capital gains tax, dividend tax or income tax on the money inside them - including the 25% government bonus.

How can I make additional payments to my Lifetime ISA in the new tax year?

If you want to make a payment to your Lifetime ISA in the new tax year, just click the green “Pay in” button on your pot. You can pay-in using the debit card stored on your account or by adding a new debit card.

If I’ve set up auto-fill, will my Lifetime ISA be maxed out before ISA contributions are made?

If you’ve set up auto-fill, it’s important that you review your ISA settings before the end of the tax year. For those customers with a Lifetime ISA we would recommend that you turn off auto-fill and manage the initial ISA subscriptions manually in the new tax year. This way you can make sure new funds you pay in, or non-ISA wrapped funds already in your account are ISA wrapped correctly.

What if I’ve changed my mind and I no longer want a Lifetime ISA?

For the 2017/18 tax year only the Government will let you close and withdraw money from your Lifetime ISA if you have decided it’s not for you. After 5th April 2018, if you’ve decided that a Lifetime ISA is not for you, you will face a 25% penalty charge for withdrawing money from your Lifetime ISA that’s not for the purchase of a house, for retirement or as a result of terminal illness. This means you could get back less than you invested.

When can I withdraw money from my Lifetime ISA to buy a house?

Once you’ve had your offer accepted you can instruct your solicitor to contact Nutmeg. Then we’ll organise for the funds to be transferred to them and used for your house purchase. Remember: You need to have held your Lifetime ISA for 12 months before you can use the money to purchase a property.

Can I use a Help to Buy ISA and a Lifetime ISA for my house purchase?

You can have a Help to Buy ISA and a Lifetime ISA. However, you can only use the bonus from one of them towards buying a home.

If you want to use your Lifetime ISA for the 25% bonus to buy a home then you won't get the bonus with the Help to Buy ISA, but you can still keep and use the money plus the interest.

If you want to use your Help to Buy ISA for the 25% bonus for a home purchase, then you would have to pay a penalty to use your Lifetime ISA savings for that property. Or you can keep contributing to your LISA and receive the 25% government bonus and use the money for your retirement.

If you want to use money from your Help to Buy and your Lifetime ISA towards the purchase of your first home, you will first need to transfer your Help to Buy ISA into your Lifetime ISA. If you combine your Help to Buy with your Lifetime ISA you will receive the 25% government bonus on the full amount. Unfortunately, Nutmeg does not offer Help to Buy transfers in to our Lifetime ISA.

What is going to change for my LISA next tax year?

After 5th April, there will be a penalty if you want to withdraw money from your LISA that’s not for the purchase of your first home, for retirement or as a result of terminal illness.

When it comes to your 25% government bonus, in the new tax year, this will be claimed and paid on a monthly basis.

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.