Good news for young people!

  • by Carole Jordan
  • 27 Jun, 2016
young adults happy about the introduction of the lifetime ISA in April 2017

The Budget 2016 introduced a new ISA for or savers aged between 18 and 40. This new ISA is designed to help with retirement planning.  It offers bonuses and tax free income. We have to hope that this will survive the changes the country faces following the vote to leave the EU.

Read more below

What is a lifetime ISA?

The Lifetime ISA was introduced to allow more flexibility when saving through an ISA. Rather than forcing the use of the money saved for a singular purpose, the lifetime ISA has been created to allow young people the opportunity to save long term – Either for their first home, or towards retirement.

Facts about Lifetime ISAs:

  • You can save up to £4,000 each year
  • You will receive a government bonus of 25% (up to £1,000 each year until you are 50)
  • There is no maximum amount you can save each month (unlike the Help to Buy ISA)
  • The total amount you can save each year into ISAs will increase (from £15,240 - £20,000)

If you use the ISA to save for your retirement you will be able to withdraw all your money after your 60th birthday tax free! However if you withdraw your money early you will not get the bonus and you’ll have to pay 5% charge on the amount saved.

Accounts are due to be available from April 2017 which is probably too early for any changes to be made to prevent this. So if you currently have a help-to-buy ISA and would like to switch you can do so in the new tax year. If you want to use both types of ISA to save for your first home, you can do this, however you will only receive the bonus from one ISA towards your house.

With Auto-enrolment just around the corner for most small businesses , pensions and retirement are a hot topic! If you need help with choosing a pension scheme , or for more information on different ways to save for retirement please get in touch. You can call us on: 01273 882200 or email us at: info@businessheads.co.uk .

All details above were correct at the time of publishing - for more up to date information please get in touch .

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