What is a lifetime Isa?
It’s a savings account that allows you to save for a property or retirement without paying tax on the interest you earn. It also offers a government bonus to boost your savings – equal to 25% of everything you save. The bonus will be added each year, so you can earn interest on it. It will be yours to keep either when you buy a property or when you reach the age of 60.The Isa will be available from April 2017.
The introduction of the lifetime ISA in the 2016 budget will provide the under 40s with a new incentive to put money aside for the future.The government contribution of up to £4,000 a year will be an attractive option for younger people looking to save towards retirement and could build up to £160,000.But the additional savings might affect inheritance tax planning when these savers are older. ISA accounts are normally included if inheritance tax is due when you die, but your pension pot could be tax free. It remains to be seen how popular Lifetime ISAs become, but savers will have to think about the long term tax consequences before deciding which saving option is best.
