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    • Home • Advice • Common questions

    LISA: Do we only get the "free" £1k pa from the UK Government if we earn and pay tax?

    09 January 2023

    Question by jim

    HI, I've read your helpful page on Lifetime ISAs following Holly's helpful FT article on 29 May 2022. I want to help my son (18, tomorrow) set one up to buy his first property. I have one important question: does he only get the "free" £1k pa from the UK Government if he is earning and paying tax? He will be a uni student for the next five years so his earning might be patchy or he might be working mostly overseas so not paying UK tax. Or is that 1k just an outright gift/top up? This is really important as we will not set up the LISA if it the 1k gift relies on him earning taxable income. Thanks, James

    Answered by Samantha Secomb

    Hi James

    It is important to just quickly explain the ISA qualifying criteria. A person has to be a UK resident to invest in an ISA. The definition of a UK resident can get complicated but the main criteria is an individual has to be in the UK for 183 days or more in the tax year they are paying into their ISA.

    If they move abroad, they cannot put money into it after the tax year that they moved, however, they can keep their ISA open and they still get UK tax relief on money and investments held in it.

    You can pay into your ISA again if you return and become a UK resident again.

    The £1k, 25% bonus from the government is not part of a gift and you do not have to earn and pay tax to get this. You just need to be a UK resident.

    It might also be useful for you to know that if cash or assets are withdrawn for any reason (also known as making an unauthorised withdrawal) there will be a withdrawal charge of 25% on the value of the withdrawal. This recovers the government bonus received on the original savings and any growth.

    I hope that helps you.

    Kind regards

    Answered by

    Samantha Secomb

    Chartered Financial Planner, FPFS

    On a mission to make unbiased financial advice relevant and accessible to women.

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