Chancellor George Osborne has unveiled a new Lifetime ISA for the under-40s which will pay savers a 25% bonus on up to £4,000 saved per tax year.
Having been announced in today's Budget, the Lifetime ISA will launch in April 2017 and is designed for first-time buyers and those saving for retirement. Anyone with a Help to Buy ISA will be able to roll it into this new Lifetime ISA.
We have already published a new Lifetime ISAs guide, which we will update throughout the day and in the coming weeks and months.
How will it work?
An eligible adult can save up to £4,000 per tax year and receive a 25% state bonus.
This means that a person saving the full £4,000 in the first year will get an additional state bonus of £1,000.
How old can I be?
Anyone aged 18 to 40 can start a Lifetime ISA (from April 2017). You can pay into it until you're 50.
What are the withdrawal rules?
- You can take out money at any time, but if you do so before you're 60 and it's not for a home, you'll lose the state bonus and any interest earned. Plus you'll pay a 5% charge.
- Funds can be used to buy a first home (up to £450,000) with the state bonus at any time from 12 months after account opening.
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When is the bonus paid?
It appears from government documents that it will be paid annually but details are vague. Keep checking our new Lifetime ISAs guide for more details.
I've got a Help to Buy ISA. How does it affect me?
If you haven't already done so, you can still open a Help to Buy ISA until November 2019 and have this and a Lifetime ISA.
But you can only use the bonus from one of the two to buy a first home.
During the 2017/18 tax year, those who already have a Help to Buy ISA will be able to transfer the savings they have built up to the Lifetime ISA.
For much more, including restrictions, exclusions and what properties you can buy, see our Lifetime ISAs guide.