Bonus and Life Events
One of the main reasons to open a LISA (Lifetime ISA) account is use those savings and the government bonus to help purchase your first home.
You can invest £ 4,000 each tax year into your LISA account, upon which you will receive a 25% bonus from the government. Hence, if you invest the maximum £ 4,000, then you will receive a bonus of £ 1,000. This bonus is claimed by your LISA manager, on your behalf, within approximately one month and is credited to your LISA account. Where you hold a stocks and shares LISA account, the bonus will be available for immediate reinvestment.
Whatever amount up to the £ 4,000 limit you invest in a Lifetime ISA account will use up part of your overall yearly ISA allowance, e.g., if an investor subscribes £ 4,000 to their Lifetime ISA, then they can only subscribe £ 16,000 to their Cash or Stocks and Shares ISA.
One of the drawbacks with LISA accounts is the withdrawal charge. If you make an unauthorised withdrawal, then you pay a 25% withdrawal charge, e.g., if you withdraw £ 1,000, then £ 250 will be deducted and you will only receive £ 750 of those funds. The funds deducted by the LISA manager will be paid back to HMRC.
You can withdraw funds from your LISA account without suffering the withdrawal charge, if you make an authorised withdrawal. Purchasing your first home counts as an authorised withdrawal and will not be subject to the 25% charge. Note, if you are buying a home jointly with someone else, it doesn’t matter if it is not their first house purchase, as long as the LISA account holder is buying their first home, then this is an authorised withdrawal and not subject to the 25% charge.
Note: I will be using the terms LISA account and Lifetime ISA interchangeably, but they refer to the same thing.
What the investor needs to provide the Conveyancer
The investor can initiate the release of funds by contacting their Conveyancer and instructing them to contact their LISA manager to request release of funds from their Lifetime ISA account for the purpose of buying their first home.
Note. THE INVESTOR SHOULD NOT WITHDRAW THE FUNDS THEMSELVES. THIS WOULD BE AN UNAUTHORISED WITHDRAWAL AND SUBJECT TO THE 25% CHARGE. THE FUNDS MUST BE PAID TO AND HELD BY THE CONVEYANCER.
It is possible that the Conveyancer will be unfamiliar with what action to take, in which case you should contact your LISA manager ask them for advice. They may be willing to provide details of what action your Conveyancer should take to obtain release of the LISA funds.
In order for the Conveyancer to approach the LISA manager for release of funds. The LISA investor should provide him with the following information:
| The full or partial withdrawal amount to be withdrawn(or aggregated amount if more than one Lifetime ISA) |
| The investor’s details including name and address (incl. postcode) |
| The account number(s) of the Lifetime ISA from which the investor will make the withdrawal(s) |
| Confirmation that they’re a first time buyer |
| Full address and purchase price of the residential property |
| That the investor will only use the withdrawal to finance the purchase price of the property |
| That they’ve not claimed a Help to Buy ISA government bonus for the same residential property purchase |
| The name and address of the seller’s conveyancer |
| That the first time residential purchase meets all the conditions for a charge free withdrawal or, in the case of a purchase of land with a dwelling which is not yet habitable, when that will take place |
| That the information given is true and complete to the best of their knowledge and belief |
What the Lifetime ISA investor needs to provider their LISA provider
| Full details of the investor’s purchasing conveyancer |
| An instruction to pay the withdrawn amount directly to that conveyancer – NOTE: THE LISA PROVIDER WILL NOT ACT UPON THIS INSTUCTION UNTIL THEY HAVE RECEIVED THE CONVEYANCER’S REQUEST TO RESLEASE THE FUNDS AND APPROPRIATE DECLARATIONS. |
What the Conveyancer must send to the Lifetime ISA manager
Your Lifetime ISA manager will not release the funds held within the account until they have received the following details and declarations from the Conveyancer:
| Confirmation that they are an eligible conveyancer |
| They have received all the relevant information from the Lifetime ISA investor who has declared that it is true and complete to the best of their knowledge |
| The purchase price of the property |
| The investor will only use the amount withdrawn towards the purchase price of the property |
| That if the purchase does not proceed within 90 days of the date of receipt of funds by the conveyancer from the Lifetime ISA, the conveyancer will return the withdrawn amount in full directly to the Lifetime ISA manager |
| Account details for receiving the withdrawn funds |
| The conveyancer’s unique professional body registration number |
| That the information given is true and complete to the best of the conveyancer’s knowledge and belief |
Time scale and extensions
The conveyancer should only make their request for withdrawal of the Lifetime ISA funds when they are confident the house will complete within 90 days.
If the sale does not complete within this deadline, then they must write to the LISA manager and request an extension of 90 days. A further 30 day extension is also available. If after the final 30 day extension the house has still not completed, then the Conveyancer must return the funds to the LISA manager, whom will credit those funds back to the investor’s LISA account, and no withdrawal will be deemed to have taken place.
A few final points
- House purchase price must be below 450k.
- The investor must be applying for a mortgage/loan.
- The property will be their main residence.
- Conveyancer must tell the LISA manager within 10 business days of the date of completion.
- If the investor holds a stocks and shares LISA account, then the investor will need to instruct the manager to sell some of those assets in order to raise the required amount of cash needed for the house purchase.