Lifetime ISA Overview
The Lifetime ISA, also known as LISA, is an ISA product available to UK tax residents between the ages of 18 and 39. You can subscribe up to a maximum of £ 4,000.00 per tax year. Any subscriptions to a LISA will use up part of your overall ISA annual allowance of £ 20,000.00. Hence if £ 4,000.00 is subscribed to a LISA, then only £ 16,000.00 is available to subscribe to another ISA product in that tax year, e.g., a Cash or Stock and Shares ISA.
Bonus
For every subscription paid into a LISA account, the investor will receive a 25% bonus from HMRC. Therefore, if you subscribe the full £ 4,000.00 in a tax year to your LISA account, you will receive a bonus of £ 1,000.00. Though, be aware any unauthorised withdrawals will suffer a 25% withdrawal charge, which your LISA provider will have to pay to HMRC on your behalf from your LISA account.
When and how is the bonus paid?
Each time you make a LISA subscription, your LISA provider will make a claim to HMRC for 25% of the subscribed amount. This will take place electronically between the provider and HMRC.
LISA providers claim bonuses for a monthly claim period. This period runs from the 6th of the month to the 5th of the following month, e.g., April 6th to May 5th.
For example an investor subscribes £ 1,000.00 to his LISA account with provider A on June 19th 2022. This will fall in the claim period June 6th to July 5th. Provider A will then claim electronically from HMRC a bonus of £ 250.00 on the investor’s behalf. This claim can take place anytime after the end of the claim period, i.e., July 6th. onwards. Note, if the claim is not made before the end of the month, then it can be claimed in the following month, but, of course, will be paid a month later.
HMRC will generally pay to the provider all LISA bonuses claimed by the 25th of the following month. Hence in the above example for a subscription made on June 19th 2022, the bonus will be claimed by the in July and paid by HMRC to the provider around the 25th of August.
Client Money Rules
LISA providers, like all UK financial institutions, have to abide by Client Money regulations, which state that when client money is received, i.e., money that is due to one of it’s clients, then it has to apply those funds within 10 business days. By apply, I mean pay those funds into your LISA account.
Therefore the short answer to when your will receive your Lifetime ISA bonus is approximately 1 1/2 months. Though, as you can see in the above example, it can be sooner depending on when you subscribed within the claim period.