The 2019 to 2020 tax year is coming to an end on Sunday, April 5. And while coping amid the coronavirus pandemic will no doubt be dominating much of the population’s priorities, Martin Lewis has issued a warning for Lifetime ISA savers about this looming deadline this week.
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That’s because on April 6, ISA allowances will reset, meaning people either have the option to use up their allowance for this tax year, or to lose it.
Writing in his weekly email, the Money Saving Expert founder told readers: “Saving for a first home? Lifetime ISA year ending – USE IT OR LOSE IT.
“If you’re 18 to 39 and a wannabe first-time buyer, you can open a top Lifetime ISA, which gives a 25 percent boost on up to £4k saved per tax year.
“Yet as the tax year ends on Sun, if you wait, you’ll lose this year’s allowance.”
Eligible savers can save up to £4,000 each tax year in a Lifetime ISA.
The government will then add a 25 percent bonus on the savings – up to £1,000.
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This amount is included in the annual ISA allowance, which in the 2019 to 2020 tax year is £20,000.
Both of these allowances will reset at the start of the new tax year – meaning it is possible to get two bonuses of up to £1,000 in 2020 – but this is over the two tax years.
Jen Lloyd, savings expert at Skipton Building Society, commented: “For those with the goal of buying a first home, it makes sense to really make the most of the Lifetime ISA contributions before the tax year is up.
“The LISA comes with a 25 percent government bonus on whatever you save (up to £4,000) – so there’s up to £1,000 up for grabs.
“So if you have an account and you haven’t reached the £4,000 limit yet, deposit as much as you can before April 6 to benefit from the maximum government top up.
“For those that haven’t opened a LISA, but are considering doing so, now is smart time.
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“By opening one now, you can still benefit from government bonus in the 2019-20 tax year, as well as the 2020-21 tax year too.
“And if you max out your LISA, this means you could receive government top-ups of up to £2,000 over the course of one calendar year (but, over two tax years).
“This can really stack-up towards a home deposit – but bear in mind, if you’re close to point of buying, you will need to have had your account opened for at least 12 months to make your first home purchase.”
Eligible savers can open an account from the age of 18, and can save into the account until the age of 50.
As such, the maximum total a person could get via the Lifetime ISA government bonus under this scheme is technically £33,000 over the course of their lifetime.
However, it’s important to be aware that people wishing to withdraw money from a Lifetime ISA may face a 25 percent penalty charge – unless it’s for one of the following reasons.
For instance, a person can withdraw money from their Lifetime ISA if they are:
- Buying their first home
- Aged 60 or over
- Terminally ill, with less than 12 months to live.
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