Lifetime ISA special

WHAT IS A LIFETIME ISA?

The Lifetime ISA (LISA) is a product designed by the Government to support people aged 18-39 to buy their first home or put money aside for retirement.

How does the Lifetime ISA work?

9 You can save or invest up to £4,000 each tax year and the Government will give you a 25% bonus on the amount you contribute, up to £1,000 each tax year

9 You can choose to save cash with a Cash LISA or invest in the stock market with a Stocks & Shares LISA

9 All savings in a LISA are tax free, as it’s a type of ISA

9 Your Lifetime ISA allowance of £4,000 is included in your total annual ISA allowance of £20,000.

If you’re saving to buy with someone else, you can track your combined savings progress in the Moneybox app with our Housemates feature.

WHAT IS THE LISA BONUS?

The Lifetime ISA bonus is a 25% Government top-up that you earn on the deposits you make into your Lifetime ISA (LISA), absolutely free. Since the annual LISA allowance is set at £4,000 each tax year, you can earn a maximum annual LISA Government bonus of £1,000 to help you buy your first home faster.

You’ll earn the 25% LISA Government bonus on everything you contribute – so save £4 and you’ll get £1 for free. Save £1,000, and you’ll get £250 for free – it’s that easy!

Decide Which Lifetime Isa Is Right For You

The Lifetime ISA is a great way to save for your first home. With Moneybox, you can choose from two types – a Cash Lifetime ISA and a Stocks & Shares Lifetime ISA.

The Moneybox Cash LISA offers a market-leading interest rate of 3.5%¹ and has been singled out as Money Saving Expert’s top pick.

If you’re saving your money as cash, you’ll have more certainty over the returns that you can expect each year – which is great for your short to medium-term goals.

A Stocks & Shares LISA is a way to work towards your first home by investing your money. As a result, you could be exposed to more risk as opposed to saving with a Cash LISA, but there’s also the possibility of higher returns in the long-term.

WHAT CAN THE LIFETIME ISA BE USED FOR?

You can use the Lifetime ISA to buy your first home (up to £450,000) anywhere in the UK, but must have had the account open for at least one year before you withdraw money to do this. The time starts from your first deposit.

You can also pay into your Lifetime ISA until you turn 50 and withdraw your savings for retirement at the age of 60. In the 10 years in between, you’ll continue to accrue cash or investment gains/losses, depending on the type of LISA it is.

If you withdraw money for any reason other than buying your first home or for retirement, you will pay a 25% Government penalty on the amount you withdraw. This means you will get back less than you have put in.

How To Max Your Lifetime Isa Bonus

Here’s a rundown of the tools you can use to maximise your LISA Government bonus with Moneybox.

Payday boost

Putting aside a percentage of your pay packet every month is a great way to get into the habit of saving regularly. What you put away completely depends on your personal circumstances and goals – the important thing is to be realistic and save what you can.

If you make £2,000 a month, putting aside just 5% of that will add up to £1,200 each year. And, with the 25% Government LISA bonus, you’ll get a £300 top-up – totally free. With Moneybox, you can set up a payday boost to your LISA to automatically set aside part of your pay packet towards your first home.

Weekly deposits

Making a habit out of contributing to your LISA is a surefire way to increase your deposits over time – which will also increase your Government bonus. So, aside from a payday boost, you can also set up a weekly deposit through the Moneybox app.

You’re in control of how much to deposit each week, and you can increase or decrease this amount depending on your spending. So, if you have a quiet week ahead, you can increase your deposits. And, if there’s a birthday coming up at the weekend, you can adjust your deposits accordingly. Because while saving for your first home is important, so is enjoying yourself in the present.

Round-ups

To really supercharge your LISA deposits and hit that £4,000 yearly allowance sooner, you can turn on our roundups feature. This will round up your everyday purchases to the nearest pound and deposit the difference into your LISA.

Many of our customers say that our round-ups feature has helped them save hundreds if not thousands of pounds. And the best part is, you don’t even have to think about it. Bought a morning coffee for £2.50? That’s 50p into your LISA. Do it 30 times in a month, and you’ve saved £15! You’ll be surprised by how much your spare change can add up to over time.

Instant bank transfer

Instant bank transfers allow you to add money to your Lifetime ISA (both Cash and Stocks & Shares) in minutes. You can pay in upwards of £100 from your linked bank account in the app, so if you make some savings throughout the month or come into a little money unexpectedly, you can make a contribution to your deposit savings with ease.

Home-buying Gift link

The Home-buying Gifts feature lets you share your unique gift link with up to four friends and family members each tax year, so they can easily contribute to your Cash Lifetime ISA and help you get one step close to achieving your homeownership goals. Each gift-giver can pay in between £100 and £500 per tax year. Not only will you get a helping hand from them, you’ll also earn interest and the 25% Government bonus on every Home-buying Gift you receive!

And finally, as with all financial products, it’s important to do your research to be sure it is the right product for you.

A 25% Government penalty applies if you withdraw money from a Lifetime ISA for any reason other than buying your first home (up to £450,000) or for retirement. Your account also needs to be open for 12 months before you can withdraw penalty-free for a house purchase. It counts as “open” once you’ve made your first contribution.

All investing should be regarded as longer term (at least five years). The value of your investments can go up and down, and you may get back less than you invest.

moneyboxapp.com

1Correct as of 8 March 2023