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If I open an ISA now with £4000 will I still get the 25% bonus?

22 March 2022

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Question by Rhi

If I open an ISA now with £4000 will I still get the 25% bonus?


Answered by Dan Willers

Hi Rhi,

Thank you for your question, which I'd be more than happy to help with.

The quick answer to your question is yes. As long as you get funds paid into a Lifetime ISA (LISA) before the end of the current tax year which is the 5th April 2022, you will receive the bonus due for any contributions made in that tax year. I wouldn't leave it too late though, and if you have the funds available to invest now, it would be better to do it earlier rather than later. May providers will naturally be busy this time of year as we approach tax year end, and so acting now will lower the risk of missing out.

LISA's are a great savings product that pay you a 25% bonus as you know, so a £4,000 contribution will attract a bonus of £1,000. Come the 6th April 2022 when the new tax year commences you will have your £4,000 LISA allowance re-set so you can make the same contribution again and receive a further 25% bonus. So as we are approaching tax year end now is a great time if you have the funds to do so to fund two tax years close together. You could effectively pay in £8,000 in a matter of weeks and receive two lots of bonus resulting in a LISA worth £10,000 for only £8,000 worth of contributions.

Most providers pay the bonus at the end of each month. So if you made a contribution of £4,000 now, it would be likely that you would receive the bonus payment at the end of March or early April. LISA's are very flexible and can accept monthly regular contributions as well as lump sum payments. So if you don't have the scope to pay in another £4,000 all in on we go next tax year, be mindful that you can make regular payments via direct debit too, so long as you don't exceed the £4,000 allowance is any given tax year.

You have a general ISA allowance of £20,000. ISAs are tax free savings vehicles and so a great way to save tax efficiently. Be mindful that if you have paid in £4,000 into a LISA, you can then only pay a further £16,000 into another ISA wrapper as your allowance is £20,000 per tax year across all ISA types.

Lastly I just wanted to highlight that LISA's are seen as long term savings vehicles to help first time buyers with a deposit, or savers to compliment pensions. Accessing them early can result in you being charged a penalty, so please be mindful of this. The link below will take you to Gov.uk and is a dedicated webpage for LISA's, so you should be able to find all the finer details about how LISA's work.

https://www.gov.uk/lifetime-isa

I hope that's been useful, but please don't hesitate to reach out further if I can be of any additional assistance.

Best Wishes,

Dan Willers
Chartered Financial Planner
Robertson Baxter Ltd
www.robertsonbaxter.com

Answered by

Dan Willers

Chartered Financial Planner

I've been in financial services for more than 18 years and have been with my current firm, Robertson Baxter, for six years. I specialise in investments, pensions, tax planning protection and estate planning, but first and foremost focus on building long-term relationships with my clients.