The Lifetime ISA explained | Barclays Smart Investor (2024)

FAQs

Can I put $20,000 in a cash ISA every year? ›

Yes, you can add money to your Cash ISA every year, as long as the total amount does not exceed the ISA cap for 2024/25 of £20,000. There is no cash ISA limit. If you contribute to more than one type of ISA during the same tax year, this total amount of £20,000 must be split and shared across the ISA accounts.

1.1 Increase the age for opening cash ISAs from 16 to 18 years old and over. From 6 April 2024 it will not be possible for anyone aged 17 and under to subscribe to more than one cash ISA . This is a mandatory change with transitional arrangements.

Are Lifetime ISAs safe? All ISAs carry an element of risk, including Lifetime ISAs, though the risk of losing your money through this scheme is generally considered low as they are a government product.

To become an ISA millionaire, you must maximise your ISA allowance; the more money you invest, the more your money will grow. Invest in the stock market instead of cash, as the stock market has better returns. Continually reinvest your dividends to boost your potential earnings.

"For most people with fixed rate cash ISAs, I can't promise everyone, but certainly enough of you very close to the end of it should be ditching them, paying the penalty, and putting them [the money] in somewhere that pays more at the moment."

However, as of April 2024, you can open and contribute to multiple ISAs of the same type without affecting your overall allowance. It's important to remember that if you don't use your full ISA allowance in a tax year, you can't carry it over to the next one.

You can pay into two ISAs in the same tax year provided they are different types of ISA. It would be fine to pay into both a cash ISA and a Stocks & Shares ISA in one tax year as long as you're below the £20,000 limit. You would not be able to pay into two different ISAs of the same type.

ISAs lose their tax-efficient status on death. This means the beneficiary will not benefit from tax-free income and growth and might have to declare them in their tax return. In addition, ISAs can form part of your estate. If your estate is liable for inheritance tax, your ISA will be caught too.

Another reason you might opt not to take out a LISA is the age limit. You must be between 18 and 39. The closer you are to 39 the more you'll need to consider whether the remaining years of government bonuses make it a worthwhile choice. Finally, you can't use the money to buy a first home with a value above £450,000.

What is the US equivalent of a lifetime ISA? ›

There is a similar structure in the U.S., namely the Roth IRA, which has similar benefits to an ISA. All contributions grow free from income and capital gains tax and in addition, there are no taxes or penalties if you want to take out the capital you have put in (excluding income and gains).

If you max out your Lifetime ISA savings each tax year, you'll get the maximum government bonus of £1,000 annually. No other account will boost your deposit savings this much, making the LISA a no-brainer for many first-time buyers.

There is no definitive answer as to whether a LISA is worth it as it will depend on the circ*mstances of the individual; the truth is that for some people it will be the right solution but for others, it will not.

You can take your savings out of a Lifetime ISA when you're 60 or over. You'll pay a 25% charge if you withdraw money or transfer the Lifetime ISA to another type of ISA before 60. If you die your Lifetime ISA ends on the date of your death. There's no charge to withdraw the funds or assets from your account.

We do not offer cash or lifetime ISAs. In any tax year you can invest up to £20,000 in your ISA.

You cannot open 2 cash ISA in the same tax year. You can open 1 and transfer the funds from another into the new one as long as you havent paid any funds into the existing one.

Top up your existing ISA online or transfer funds from an ISA held with another provider to maximise your ISA allowance. You can either set up a regular payment, pay in a lump sum or top up as often as you like, up to this year's tax-free ISA limit.

If you invest more than £20,000 in your ISA in a tax year, the excess amount will not be eligible for tax relief. However, you can contact HMRC, or they will contact you at the end of the year to reclaim the money and charge taxes owed on the money.