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Lifetime ISAs

Bonuses, payments and withdrawals

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

No you don’t need to take any action. You can see your pending bonus on your dashboard alongside your Lifetime ISA pot.

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

Your bonus will be paid directly into your Lifetime ISA account. We’ll then invest the new funds automatically in line with your selected risk level on your Lifetime ISA pot. The investment will take place through the next investment cycle.

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

No. 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?

If you want to make a payment to your Lifetime ISA, 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?

From 6th April 2020, if you’ve decided that a Lifetime ISA is not for you within 30 days of opening the account, you can withdraw and close it without penalty. However, any market movements may impact the amount you receive.

If you've held it for more than 30 days, the government will charge you a 25% penalty on the total value of the withdrawal, unless it's 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, it must be at least 12 months since the first contribution was made to your Lifetime ISA before you can withdraw funds from it to buy your first home.

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.

You may be able to transfer your Help to Buy ISA into a Lifetime ISA, but from the 2020/21 tax year, any funds transferred from a Help to Buy ISA to a Lifetime ISA will be treated as current year payments and count towards the annual Lifetime ISA limit. As a result, it won’t be possible to transfer your Help to Buy ISA if the balance is more than £4,000. If you’re able to combine your Help to Buy ISA with your Lifetime ISA, you will receive the 25% government bonus. Unfortunately, Nutmeg doesn’t offer Help to Buy transfers into our 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 to 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 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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