Hey guys, it's sasha the lifetime isa account known as the lisa is not quite as popular. It seems as some other types of isa accounts, but i'm getting a lot more questions recently about it. What exactly it is, how exactly does it work, so i thought i'd make a complete guide to lifetime isis with everything you need to know in this video now, just before we get started, i am not a financial advisor. I can provide financial advice to you and if you do need financial advice, please make sure you go and seek the help of a suitably qualified professional.

This is purely for educational purposes. Only now a lifetime isa is a special type of isa. An individual savings account that exists for two purposes and two purposes: only. It allows people to either save money for their first home or as a way of planning for their retirement.

The way the account works generally is the same for both of those purposes. Although there are some differences that i'm going to cover, when i talk about them, one at a time as with all other isis, the main benefit of having a lifetime isa is that you don't have to pay tax on the growth of your money. So when your money is invested in a lifetime, isa as it grows, you don't have to pay any kind of income, tax, dividend, tax or capital gains tax on any of the proceeds, i'm going to come to that in a little bit later. First, let me tell you about some rules that apply to lease accounts that are really important to know, because these are somewhat different to other isis number one.

You can only open a lifetime, iso account between the ages of 18 and 39.. Once you turn 40, the door is shut and you can't open a new light on isa account any longer. Unlike other types of isa, the limit for lifetime isis is a lot lower, there's only four thousand pounds per financial year from the sixth of april. One year to the fifth of april the following year, you can only deposit up to four thousand pounds into a lifetime.

Isa, although you can deposit up to twenty thousand in total across all the other accounts and the other accounts, don't have this lower absolute limit now remember you can only pay into one lifetime isa in any one financial year, so you can't open more than one and Do 4 000 deposits into each? You can't do even 2 000 deposits into two different lifetime. Isis, as with all isis you're limited to one type of isa account per financial year in terms of the one that you're paying money into the four thousand pounds is still part of the 20 000 total isa allowance. So that means, if you open one of different kind of isa, you can open up to four. You can open cash, you can open stocks and shares.

So if you open different kinds of ice accounts, you can deposit into all of them, but the 20 000 pound total limit still applies. So if you deposit 4 000 into a lifetime iso, you can still deposit up to 16 000 pounds into one of the other types of iso accounts. Although you can open a lisa account up to when you turn 40, you can actually continue paying into it. For another 10 years up until just before you turn 50., you can keep the account at that point, so you don't have to close it down.

You don't have to do anything with it, but once you turn 50, you can't make any more payments into it. Although the investments and the money that you have invested within the lisa can continue to grow now, when you pay into the lifetime isa account, the uk government will actually top up the account with a 25 bonus, and this is quite unique. This is what makes this one really different to the other ices. So if you pay 4 000 pounds into a lisa account, the government will then add another 1 000 pounds on top, so the total amount you're gon na have in your account, is essentially gon na.

Be five thousand just remember that only the 4 000 that you put in count towards your isa allowance. So it's not the 5 000. So, in effect, you get that 1 000 bonus and if you invest 4 000 to a lisa and 16 000 into other types of iso accounts in effect, you're going to get 21 000 pounds worth of benefit put into those accounts in that financial year. There are two different types of lisa accounts, and this is something really important to understand one once you make the deposit and after the government adds their extra 25 bonus, the two different types work pretty much exactly like a cash isa or a stocks and shares isa Account with a cash version, you will get interest paid to your account as a regular sort of invest.

Savings. Sorry account so you want you put money in and you're going to get some interest paid normally that interest at the moment, given the interest rates is going to be very, very low with the stocks and shares isa, your money can be invested in actual stock market. However, there are no pure stocks and shares lifetime. Isa accounts out there as it stands.

The ones that do exist are limited to only being able to invest into proprietary funds, and these generally speaking, don't return anywhere near as much and the average returns are going to be much lower than you. If you were, for example, investing in something like this p. 500, so you can't just go and buy some shares of tesla with your lisa account. You are unfortunately restricted to only being able to invest in the small number of funds available with these providers.

However, the 25 bonus upfront is pretty awesome and, in some cases for some people may be worth it. Despite the lower returns on one of these accounts that maybe you would get in a real normal kind of full f. For fact, if you like stocks and shares iso account now, there are two different ways in which you can withdraw money from a lisa account. This account isn't quite as flexible as some others.

Once you put money in you can't just go and access it. You can only get it if you either buying your first home or when you reach the age of 60 or over, and that's it the only exclusion to this list, if you is, if you are diagnosed with a terminal illness. So, generally speaking, once your money is in a lisa account, those are the only two reasons why you can actually pull it out. Technically, you can withdraw money at other times, but you're gon na have to pay a penalty for the next month or so up until the 5th of april 2021.

That penalty is 20, but it's going to go up to 25 after that, so in essence, you lose all benefit of having this account because you're going to be paying back the 25. The government gave you and any growth of that money as well, so that kind of nullifies it completely. There are a few rules that apply when you're buying your first home so make sure that the situation that you're in works for you, because if this doesn't apply - and you don't buy your first home within these rules, you're gon na - have to wait until age 60. Before being able to go and get your money out without having to pay that penalty rule number one, the property has to cost 450 000 pounds or less rule number two.

You have to wait at least 12 months after making your first payment into a lisa before buying, so you can't just go and raise an extra 1 000 pounds just before buying a house. You have to wait at least a year from when you made your first payment. You also have to buy the property with a mortgage. So if you, for whatever reason, you're a cash buyer and you're able to go and afford the house outright, you won't be able to use the leaser in order to raise the extra money for that purchase.

You will have to do it through a mortgage. If you choose to do that now, if you're buying a house with your partner or somebody else, both people can take advantage of the lisa account and you can have essentially two lots of these lisa money with the extra 25 given by the government. But it has to be the first home for both of those people in in the case that only one person has it as their first time and the other. Doesn't.

The other person will have to pay that penalty fee in order to draw the money out at that point in time. If they choose to do so now, the other way to draw money from a lisa account is any time after you turn 60. So in a way can be used alongside other types of retirement accounts or future planning accounts, and the 25 bonus from the government is really nifty in some ways, because you can save up a lot of money very quickly. You sort of get a 25 boost.

The moment you put your money in, but you can only put 4 000 pounds a year into this account, so that's one restriction and unlike pensions, you have to contribute money after taxes. So after you pay taxes into this account, so you don't get that tax-free benefit. However, when you pull the money out once you turn 60, you can take it all without having to pay any tax which is different to pensions, because you're going to be taxed at that point in time. So you need to go and have a think around.

What is the optimal kind of way of diversifying your funds between different types of pensions and future planning accounts for you? So that's about all. There is to it if you're buying a first property relatively soon, but at least 12 months from now a lisa account can be a great way of raising a bit of extra cash for that deposit. If you want to diversify the places where your money is kept for retirement and for old age, you can also be really handy, but just remember that that money is tied up and if you withdraw it. You're gon na have to pay that big penalty before the age of 60..

I hope you guys found this useful. If you have please make sure you smash the like button for the youtube algorithm so that more people can watch this video. Thank you so much for watching and i'll see you guys later. You.