ISA

A guide to a lifetime ISA for students

Have you ever wondered if there is any chance to save smart and safe? If yes, Lifetime Individual Savings Account can help you to buy your first home or take care of your retirement needs. Here is everything you need to know  about where and when to begin your savings via ISA.

According to the government’s official website, a person must be 18 or older but younger than 40 to be eligible to start using ISA. This account will let you add up to 4,000 pounds every year until the age of 50. However, the first payment to ISA has to be made before you become 40.

The fun part of this financial scheme is that the government will give a maximum 25% bonus to your savings, up to £1,000 every year, and it is possible to have cash or stocks and shares in the account or a permutation of both.

However, when you reach 50, you won’t be able to add money into the ISA account or earn 25% given by the government. The good news is that even after 50, your account will remain open, and your savings will still get an interest or returns of investments.

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There are some additional rules to use a Lifetime ISA scheme. “To open and continue to pay into a Lifetime ISA, you must be a resident in the UK, unless you’re a Crown servant (for example, in the diplomatic service), their spouse or civil partner.”

To take out your savings from ISA, you have to be buying your first home, be aged 60 or more, or have less than 12 months to live. Otherwise, you will face additional financial costs. “You’ll pay a withdrawal charge of 25% if you withdraw cash or assets for any other reason (also known as making an unauthorised withdrawal). This recovers the government bonus you received on your original savings.”

If you want to use ISA savings to purchase a house, there are a few things to keep in mind: the property should cost £450,000 or less; the property is bought at least one year after the first payment into the Lifetime ISA; the services of a conveyancer or solicitor are used in the purchase, then the ISA funds will be paid directly to them; you’re buying with a mortgage.

In case a property is bought with someone else who has ISA, they are eligible to use their savings also the government’s bonus, then that person will have to  pay a 25% withdrawal charge in order to use their Lifetime ISA savings if they own property, or have a legal interest involving property.

If it happens that you acquire a Lifetime ISA and a Help to Buy ISA, you can only use the government bonus from one of the schemes in orfer to buy your first home. “You can transfer money from a Help to Buy ISA to a Lifetime ISA. If you transfer money from a Lifetime ISA to a Help to Buy ISA, you’ll have to pay the 25% withdrawal charge.”

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The opportunity to have a Lifetime ISA is currently offered at the banks of Barclays, Lloyds and RBS, but, according to the Save the Student, the best Lifetime ISAs are at the Moneybox, Nottingham Building Society and Paragon.

When it comes to Help to Buy ISA, Barclays closed this opportunity to the new savers, but money can still be filled in an existing account till 30 November 2029. The specific deadline for claiming this scheme is disclosed on the Barclays official website. “The deadline for claiming the Help to Buy: ISA bonus from the government is on or before 1 December 2030.”

Starting to claim a bonus from the Help to Buy ISA at Barclays, at least £1,600 should be saved, and then the £400 bonus will be able to take. The maximum bonus is £3,000 if you have kept £12,000 or more as your closing balance.

“To qualify for the government bonus, the property must be in the UK and with a purchase price of up to £250,000 outside of London and £450,000 inside London.” To claim Help to Buy ISA bonus, you have to fit the criteria of being a first-time buyer; purchasing a property with a mortgage; saved a minimum of £1,600, closed your account in one transaction when you’re ready to purchase your first UK property. You can’t use the government bonus to cover any costs before completion or to use as the deposit when you exchange contracts; passing your closing statement to your solicitor or conveyancer so they can claim the government bonus for you.

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You are able to pay a maximum of £1,200 in the calendar month of the first deposit and up to £200 every calendar month till November 2029. The savings aim can even be set in the app to observe the progress. Money can be taken away anytime you would like, but making withdrawals won’t let making savings, as only £200 can be paid per month, and the bonus amount given by the government is based on the closing balance when you claim. More details are available on the official Barclays’ website.

Help to Buy ISA is also no longer available at the Lloyds bank for the new accounts, as the government closed it on 30 November 2019.  However, those who already have one can transfer it to Lloyds through the phone. “The ISA is for first time buyers, saving to buy a house up to the value of £250,000 outside London or £450,000 inside London.”

In Lloyds, tax-free variable interest is 0,75% to the savings ranging from £1 to £12,000. If there is any access over £12,000, then it is 0.05% tax-free/AER. Up to £3,000 can be received as a 25% bonus from the government if the closing balance is 1,600 and more. You have to remember that the bonus cannot be used as a deposit or any other costs before the completion of buying a property. More details can be found on Lloyds official website.

Unfortunately, RBS does not offer Help to Buy ISA, only the Lifetime ISA.

Hopefully, this list was a clear guide on the Lifetime and Help to Buy ISAs, and now you will be able to make the right financial decision.

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