ISA: Could you amass huge £33,000 bonus? There's an important date to be aware of in 2020
There are four types of ISAs, and these are cash ISAs, stocks and shares ISAs, innovative finance ISAs, and Lifetime ISAs. It’s possible to put money into one of each kind of ISA each tax year, although there is a limit as to how much can be saved in them each tax year.
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In the 2019 to 2020 tax year, the maximum a person can save in ISAs overall is £20,000.
There is also a particular limit for the Lifetime ISA.
In this kind of ISA, a person can save up to £4,000 in it each tax year until they are 50 – and this is included in the overall £20,000.
The government will add a 25 percent bonus to these Lifetime ISA savings, up to a maximum of £1,000 per year.
This means that depending on how much is put away and across which tax years, the government bonus could reach up to £33,000.
However, withdrawal charges of 25 percent may apply, if the reason is not one of the following:
- Buying one’s first home
- Aged 60 or over
- Terminally ill, with less than 12 months to live.
Adrian Lowcock, head of personal investing at Willis Owen explained the different between a Help to Buy ISA – which is no longer available for new savers to open – and a Lifetime ISA last year.
While the deadline to open a Help to Buy ISA has since past, this type of account also offered a 25 percent government bonus.
The amount that a person could have saved was different in a Help to Buy ISA to a LISA, and withdrawal terms differed too.
Speaking exclusive to Express.co.uk, he said of Lifetime ISAs: “These came in as upgrade to the Help to Buy ISAs. You can put £4,000 in each year into either cash or stocks and shares.
“The LISA is designed to be used for first time buyers to use towards a deposit for a residential property or for retirement from age 60.
“The LISA is open to any UK resident from aged 18-40 and comes with a 25 percent government bonus.
“So £1,000 [of savings] gives you an extra £250 [via the government bonus].
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“Bonuses are paid each year until the age of 50 and is paid monthly with a maximum of £33,000.
“You can only put £4,000 into a LISA and can still open a cash ISA or Stocks and Shares ISA and put in the remainder of the ISA allowance £16,000.”
The tax year for 2019 to 2020 ends on April 5, 2019, with the new tax year beginning on April 6.
This means that the final day that a person can save money in their Lifetime ISA in order to get the 25 percent bonus of up to £1,000 in 2019 to 2020 is approaching.
Steve Code, Insurance Director at Unity Mutual, explained: “To maximise the tax-free savings within a Lifetime ISA, an investor can invest £4,000 between now and April 5, 2020 to ensure they receive the maximum bonus of up to £1,000 from the Government.”
Mr Code explained that, from April 6, 2020, when the new tax year starts, “investors can again invest another £4,000 (assuming the rate stays the same for Lifetime ISAs) and receive up to another £1,000 bonus payment into their Lifetime ISA”.
He continued: “This means that theoretically two payments of up to £4,000 can be made in 2020 (one in the 2019/20 tax year and another in the 2020/21 tax year).
“Lifetime ISAs are a valuable tool for the government to help tackle the problem of young people struggling to get onto the property ladder.
“They reward committed saving but also have a degree of flexibility too.”Source: Read Full Article