Poltics
Then again, there would possibly per chance well additionally be a downside
MONEY-SAVING knowledgeable Martin Lewis has issued a reminder to anyone between 1984 and 2006 as they can get £1,000 for free.
On his BBC Sounds podcast, the finance guru highlighted the advantages of a Lifetime ISA, which rewards savers with bonus funds.
He acknowledged: “The Lifetime ISA is a product you can open when you are between the ages of 18 and 40 – so the last day you can open it, is the day before your 40th birthday.
“You can then assign up to £4,000 a yr in it, and the snort will add a 25% bonus on whatever you would possibly per chance per chance well want saved.
“If you saved the maximum £4,000 a year, the state will add £1,000 that year.
“You can attain that yr after yr and you preserve getting the bonus unless you are 50.”
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On his X account, Mr Lewis added the tip is well worth looking into if you “aim to buy a dwelling one day (or your children are that age and hope to)”.
Some commenters voiced their scepticism about their chances of ever affording a house of their own.
It comes after tens of thousands of Lifetime ISA holders were fined a combined £75.2 million for withdrawing their money from the special bank account early.
Figures released last week revealed, on average, holders had been charged penalties of £755 each.
The total value of LISA withdrawal charges hit £75.2 million in 2023-24 after 99,650 people made unauthorised withdrawals.
According to HMRC, this is nearly 40% higher than the previous year, when withdrawal penalties totalled £54.3 million.
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The LISA was launched in April 2017 and is a savings product which is designed to help people save for either a first home or retirement.
It effectively replaced the former Help to Buy ISA.
The account is tax-free and anyone between 18 and 39 can open one.
You can save up to £4,000 a year and the government will then add a 25% bonus on top, effectively giving you free money.
But the only way you can make an authorised withdrawal from your LISA is if you are buying your first home, aged 60 or over or are terminally ill.
If you withdraw your savings for any other reason, you’ll pay a 25% “unauthorised withdrawal” penalty.
But this doesn’t mean you will just pay the 25% government bonus back.
This is because you have to pay it back on the total sum – including the government bonus.
So, if you had £2,000 saved and got the 25% bonus, taking you to £2,500, then took money out your account, you would then have to pay the 25% fee back on £2,500 – which is £625.
This means you’d lose £125 of your own money.
Some 56,900 people used their LISA to buy their first home in 2023-24, and under LISA rules the home must cost £450,000 or less.
However, LISA savers have to pay a 6.25% fine if they buy a home costing over £450,000 – a cap which has been frozen for seven years.
This is also classified as an “unauthorised withdrawal” penalty.
This has become more of a problem in recent years as house prices have risen sharply since the £450,000 limit was originally introduced.
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According to the latest Land Registry data for March, the typical UK house price is £290,000.
Whereas in April 2017, when the LISA was launched, a typical home cost £220,094.
What is a Lifetime ISA?
FIRST-time buyers saving into a LISA can stash up to £4,000 into this account each year tax-free.
The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.
For example, if you save £4,000, you’ll get a £1,000 bonus.
The amount you pay in is linked to your annual ISA allowance (£20,000 for 2023/24) – for example, if you pay £1,000 into your LISA, you can still pay £19,000 into other ISA products.
Any bonus you earn doesn’t count towards your ISA allowance.
You can open a Lifetime ISA with any bank, building society or investment manager that offers the product.
You can only open a LISA if you’re aged 18–39.
You can hold multiple Lifetime ISAs, although you can only pay into one each tax year.
You can also transfer your Lifetime ISA to another provider, for example, to get a better interest rate.
If you want to use a Lifetime ISA to buy a home, there are a few restrictions you need to keep in mind:
- Only first-time buyers can use Lifetime ISAs to buy a home, which means you can’t own, or have owned, a home in the UK or anywhere in the world.
- You’ll need to be buying a home for no more than £450,000.
- You must be buying a home you plan to live in – the scheme isn’t for buying a home you want to rent out, or a holiday home.
If you don’t use it to buy your first home, you can continue paying into a LISA until you’re 50.
You can then make full or partial withdrawal from your LISA, without paying a fee, when you turn 60.