Important information - the value of investments and the income from them, can go down as well as up, so you may get back less than you invest.
Q. My daughter is 18 in June. Can she have an ISA and a LISA running at the same time?
The short answer is yes, she can open an ISA and Lifetime ISA and ‘run’ it at the same time. However, while she can contribute to both accounts in the same tax year, she must be wary of not exceeding her annual ISA allowance. This is £20,000 for the 2024/5 tax year.
For example, if your daughter contributes £4,000 to her LISA (this is the maximum amount you can contribute in a LISA), it will eat into her annual ISA allowance. That means your daughter can only contribute up to £16,000 in her ISA.
It’s also worth noting that you can only pay into one Lifetime ISA each tax year, but you can open a new LISA with a different provider in a new tax year.
For those unfamiliar with a LISA, it’s a tax efficient way to save. Your LISA allows you to hold cash or stocks, or a combination of both.
For young people it’s a popular way to save for your first house, if the price doesn’t exceed £450,000. Since the government essentially top up your LISA by adding a 25% bonus to your savings, up to a maximum of £1,000 per year (that is if you contribute the max amount of £4,000), it’s also a handy way to save for retirement.
Learn the LISA rules
The LISA does come with some rules. You must be 18 or over but under 40 to open a Lifetime ISA, according to GOV.UK.
When you turn 50, you will no longer be able to pay into your LISA or earn the 25% bonus. However, your account will stay open and your savings will still earn interest or investment returns.
You can withdraw money from LISA if you’re buying your first home, you’re aged 60 or over, or you’re terminally ill with less than 12 months to live.
However, if you withdraw your money for any other reasons, you’ll pay a withdrawal charge of 25%. That applies to withdrawing cash or assets. This essentially recovers the government bonus that you received on your original savings.
Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Tax treatment depends on individual circumstances and all tax rules may change in the future. Eligibility to invest into an ISA and the value of tax savings depends on personal circumstances and all tax rules may change. This information is based on our understanding of the proposed LISA rules which may be subject to change. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.
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