Published On: Fri, Sep 6th, 2019

Help to buy ISA vs Lifetime ISA – which offers biggest bonus from UK government? | Personal Finance | Finance


There are a number of differences between a Help to Buy ISA and a Lifetime ISA. The reason for getting one, for instance, could affect which type of these savings accounts one chooses – that’s if they decide to opt for one of these options. A Lifetime ISA can be used either to buy a first home, or for savings for later life. Meanwhile, as the name suggests, a Help to Buy ISA is a scheme which can help a person to get on the property ladder.

With a Help to Buy ISA, the government tops up savings by 25 per cent – up to a maximum bonus of £3,000.

This doesn’t need to be paid back, and if the buyer is purchasing with someone else, then they also may be able to get a Help to Buy ISA.

Eligibility rules do apply, with the gov.uk website explaining that the home must have a purchase price of up to £250,000 – or up to £450,000 in London.

It should also be the only home that the purchaser owns, and be where the buyer intends to live.

The first payment to the ISA can be up to £1,200, and then a maximum of £200 per month may be paid in.

The government will also add a 25 per cent bonus to savings in a Lifetime ISA, with this being up a maximum of £1,000 per year.

However, when a person turns 50, they are not able to pay into their Lifetime ISA or earn the 25 per cent bonus – although the account will stay open and savings will still earn interest or investment returns.

A maximum of £4,000 may be paid into a Lifetime ISA each year, until one reaches their 50th birthday.

This counts towards the annual ISA limit, which is £20,000 in the 2019 to 2020 tax year.

In order to withdraw the savings without a 25 per cent charge, the individual must either be buying a new home, be aged 60 or older, or be terminally ill with less than 12 months to live.

Should the first situation be the reason for a person making the withdrawal, the property must cost £450,000 or less, be bought at least 12 months after opening the Lifetime ISA, and be bought with a mortgage.

It’s also a requirement that the buyer uses a conveyancer or solicitor to act on their behalf in the purchase.

With a maximum government bonus of £1,000 per tax year, it’s down to the saver as to how much they put into a Lifetime ISA (within the limits) in order to get the bonus.

A person can open a Lifetime ISA from the age of 18 until their 39, and pay into it until they’re 50.

According to the Money Advice Service, if a person contributes £4,000 per year from the age of 18 until they’re 50, they could earn up to £32,000 in government bonuses.

This could reach £33,000 in government bonuses if a person reaches the age of 18 before April 6.

Help to Buy ISAs are available for new savers until November 30, 2019.

They will remain open for savers after this date, however the bonus must be claimed by December 1, 2030.



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