Please be aware we are not currently able to offer any Lifetime ISAs from Santander.
Who are Santander?
Santander are one of the UK’s largest retail and commercial banks. They are a household brand in the UK and still operate a large number of high-street branches across the country offering a face-to-face service.
They provide many financial products and services for personal and commercial banking, including ISA accounts for individual savers.
At the current time, Santander do not offer a Lifetime ISA product.
What is a Lifetime ISA?
A Lifetime ISA (LISA) is an investment product designed by the government to incentivise people under 40 to save for a first house deposit.
HMRC adds 25% to everything you put into your Lifetime ISA.
For example, if you contribute up to the annual LISA limit of £4,000, HMRC tops this up 25% to £5,000 for free.
What are the advantages of a Lifetime ISA?
ISA stands for Individual Savings Account, and all ISAs are tax-efficient by nature.
In a LISA, or any other type of ISA, you don’t have to pay:
- Capital Gains Tax on the growth of your investments
- Income tax on the interest you earn
- Income tax on dividends you receive
In addition to the tax benefits, Lifetime ISAs also benefit from the following features:
- You can invest in either a Cash LISA with fixed or variable interest rates, or a Stocks and Shares LISA which gives you access to the entire stock market.
- You can save up to £4,000 per year, and get a free £1,000 each year from HMRC.
- You can put both your and your partner’s Lifetime ISA savings towards the same house deposit as long as it’s your first home.
- You can withdraw your funds free of charge at age 60 if you don’t end up using them for a house deposit.
What are the disadvantages of a Lifetime ISA?
The primary drawback of Lifetime ISAs is the charge you pay for withdrawing if it’s not for a first house deposit or at age 60.
The government charges 25% on withdrawals that don’t fit into the above criteria.
This charge is greater than the bonus you originally get from HMRC because of the way percentages work.
We demonstrate this in the example below.
How your Lifetime ISA’s unsolicited withdrawal charge outweighs the 25% government bonus
- You contribute £4,000 to a Lifetime ISA.
- HMRC adds 25% of £4,000, which is £1,000, bringing your total amount invested to £5,000.
- You then withdraw your full £5,000.
- HMRC charges 25% of your withdrawal, which is £1,250, leaving you with just £3,750 to withdraw.
- This comes to £250 less than you originally invested, representing a -6.25% loss.
What type of house can I buy with a Lifetime ISA?
Before investing in a Lifetime ISA it’s important to review what types of house purchases qualify for LISA funds.
You don’t want to invest in a LISA and it not be eligible for your property purchase as you’ll then have to wait until age 60 before you can withdraw your money free of charge.
Lifetime ISA property rules:
- The property must be the first home you’ve bought
- You must live in the property – it can’t be a buy to let
- The property must be valued at £450,000 or under
- You must be buying with a mortgage and not purchasing the home outright with cash
- You must have held your Lifetime ISA for at least 12 months before cashing in
Can you transfer a normal ISA into a Lifetime ISA?
You can benefit from the 25% government bonus on your existing ISAs by transferring them into a Lifetime ISA.
You just need to complete at Lifetime ISA transfer form with your LISA provider, and they will administer the transfer on your behalf.
You’ll only be able to transfer up to £4,000 of ISAs to a Lifetime ISA per tax year as your transfers count towards your annual LISA allowance.
How do I open a Lifetime ISA?
To open a Lifetime ISA account:
- Go to your chosen Lifetime ISA provider’s website
- Follow the instructions to create an account
- Have your National Insurance Number to hand
- Use your debit card to make a lump sum contribution or bank details to set up a Direct Debit
You must also be between the ages of 18-39, and be a UK resident.
You can also open a LISA account over the telephone or with a postal application form.