The tax year end is just weeks away, with this falling on April 5, 2020. The following day, on April 6, 2020, the 2020 to 2021 tax year will begin, and this means that annual ISA allowances will reset.
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Ahead of the end of the tax year, Martin Lewis has appeared on This Morning to discuss Lifetime ISAs.
A Lifetime ISA – which is sometimes known as a LISA – is a type of Individual Savings Account (ISA), and it may be that a person opts to open one in order to buy their first home or save for later life.
Savers must be 18 or over, and under 40, in order to open this type of account.
It’s possible to put in up to £4,000 each year into a Lifetime ISA, until the saver reaches the age of 50.
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Martin Lewis spoke about saving money and Lifetime ISA on This Morning this week (Image: ITV • GETTY)
This is included in the annual ISA allowance, with this limit being £20,000 for the 2019 to 2020 tax year.
The government will add a 25 percent bonus to savings in a Lifetime ISA, up to a maximum of £1,000 per year.
Speaking on This Morning today, Mr Lewis explained what the rules are when it comes to Lifetime ISAS, as well as highlighting some of the top-paying interest rates on Lifetime ISAs at the moment.
He also explained what options people who may not be able to open or pay into an ISA could have instead.
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One option could be to pay into a Help to Buy ISA, should a saver have opened one before the closing date for new applications in November last year.
“If you opened a Help to Buy ISA before they closed for new applications in November last year, you can keep saving in it till November 2029 and use it for the 25 percent house bonus till December 2030,” the Money Saving Expert has said.
He told This Morning viewers: “Many people will have Help to Buy ISAs. Nothing wrong with them, you just can’t open them anymore. If you’ve got one and you’re 45, or 55, or whatever it is, carry on with that.”
Should the individual not have already opened a Help to Buy ISA, Mr Lewis instead suggested they may look at the best savings accounts.
Martin Lewis spoke about Lifetime ISAs ahead of the tax year end (Image: GETTY)
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“If you’ve missed the boat on that, and you’re too old to open a Lifetime ISA or you’re not going to be buying a property that’s qualifying, i.e. it might be over £450,000, well then you’re just going to have to put your money in the top normal savings,” he said.
“Now, there are some things out there if you were saving regularly, if you were saving each month, then Coventry Building Society [regular saver] pays 2.5 percent [AER] on up to £500 a month in it.
“Or the top easy access accounts are Marcus Bank and Saga at 1.3 percent [AER].
“You just put your money where you can, but as you can hear, those interest rates are nothing compared to the 25 percent boost that you get on putting your money in a Lifetime ISA as a first-time buyer.”
Mr Lewis also explained that eligibility rules apply when it comes to a Lifetime ISA, and it may be that a person faces a 25 percent withdrawal charge – unless the reason for withdrawing the money is one of the following reasons.
A person can withdraw money from their Lifetime ISA without the charge, if they’re:
Buying their first home on a qualifying propertyAged 60 or overTerminally ill, with less than 12 months to live.
This Morning airs weekdays on ITV from 10am.