Sutton business advisers and accountants Harmer Slater has issued details of the new “Lifetime ISA”.

In the Budget, the Chancellor announced the introduction of a new flexible savings plan to help the under 40’s save for the future. Starting in April 2017, the government will launch a new Lifetime ISA that will help those aged between 18 and 40 to save for a new home or for their retirement.

The new scheme will see the government provide a bonus of 25% on yearly savings of up to £4,000 until the saver’s 50th birthday. Any savings put in before the Lifetime ISA holder’s 50th Birthday will benefit from the 25% bonus. This could mean an extra £1,000 for every £4,000 saved annually from the age of 18 to 50. In total this could see savers who invest the maximum contributions of £128,000 receive a maximum government bonus of £32,000.

The savings and bonus can be used to purchase a first home worth up to £450,000 anywhere in the UK or to save towards retirement. A saver will be able to withdraw the savings tax-free after their 60th birthday. The funds can remain invested after age 60 and any interest and investment growth will be tax-free. The money can be withdrawn earlier (for something other than the purchase of a first home) but the government bonus will be lost and a 5% exit charge will be payable.

Details

Harmer Slater are an independent firm of chartered accountants and business advisers located in Sutton, close to central London with experience in dealing with listed and unlisted businesses operating across a range of industries in the UK and overseas. For full details go to HARMER

Any contributions to a Lifetime ISA will be part of the overall ISA annual contribution limit. This limit will increase to £20,000 from April 2017. The government bonus will be paid annually at the end of the tax year.