The first cash-based Lifetime ISA recently entered the market, allowing adults under the age of 40 to put aside cash sums in order to save for their first home or their future retirement.
The Lifetime ISA was first introduced in April, but initially only share-based investments were available. A new cash Lifetime ISA has since been launched.
Under the scheme, savers aged between 18 and 39 can invest up to £4,000 a year and will receive a 25% bonus on contributions from the government up until their 50th birthday.
Both the tax-free savings and the government bonus can be used for a deposit for a first home in the UK worth up to £450,000 at any time from 12 months after first saving into the account.
Alternatively, the funds, including the government bonus, may be withdrawn from the Lifetime ISA from age 60 tax-free for any purpose. However, where the funds are withdrawn before the age of 60 the account holder will lose the government bonus (plus any interest or growth on this) and will be liable to pay a 5% surcharge.
For further information on the cash Lifetime ISA or for other tips to reduce your tax, please contact us.
Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.