Compare Investment ISAs
Save for your first home and retirement at the same time
Investment ISAs put your capital at risk & you may get back less than you originally invested
- Fund Choice: A range of portfolios for your Lifetime ISA suited to your chosen risk level and investment style
- Invest From: From £100 to £4,000.
Why we like it: Simple annual portfolio management fees of 0.45%-0.75% up to £100k. 0.25%-0.35% beyond £100k. There are some underlying fund costs and market spread charges. Easy, online setup. Start with as little as £100 up to £4,000. Plus, live chat, helpful customer support and really useful investor tools & guides. Nutmeg are regulated by the FCA & are covered by the FSCS. Lifetime ISA and tax rules apply. Capital at Risk. Approved by Nutmeg 09/08/2024
- Fund Choice: Over 2,000 Funds, Shares and ETF's
- Invest From: £25 per month
Why we like it: Start from £25 pm & save up to £4,000 pa. Wide choice of stock market linked investments or utilize investment ideas. Can be retained in cash. Simple annual management fee of 0.25%. Deal from £1.50 & never pay more than £5.00 per online deal. AJ Bell are regulated by the FCA & are covered by the FSCS. AJ Bell do not offer advice. Capital at risk
- Fund Choice: Choose between a Cash Lifetime ISA and get a competitive interest rate on top of your tax-free savings and a government bonus, or a Stocks & Shares Lifetime ISA to invest and grow your first home savings over time. Government withdrawal charge may apply
- Invest From: £1
Why we like it: Cash Lifetime ISA: Market-leading interest rate of 4.8% AER (variable) which includes a 3.8% base rate (variable) and a fixed one year bonus interest rate of 1%. Stocks and Shares Lifetime ISA: Three starting options: Cautious, Balanced or Adventurous. Earn 3.25% AER variable on any uninvested cash you hold within Stocks and Shares Lifetime ISA. Use handy Deposit Calculator to work out how much you need to save, and how long it’ll take you to achieve your deposit goal. Useful Jargon-busting First Time Buyer guides. Must be UK resident aged 18-39. If you need to access your money for any other reason than your first home or retirement, you’ll pay the Government penalty
- Fund Choice: Over 3,000 Funds, Investment Trusts, Bonds, ETF's or Cash
- Invest From: £100 single or £25 per month
Why we like it: Easy to setup in a matter of minutes. Start with as little as £25 pm & save up to £4,000 pa. Wide choice of stock market linked investments, or can be retained in cash. Simple annual platform fee of 0.45%. Other charges may apply. Hargreaves Lansdown are regulated by the FCA and are covered by the FSCS. Capital at Risk
Please be aware we are not currently able to offer any Lifetime ISAs from Nationwide.
Who are Nationwide?
Nationwide are the largest building society in the UK. They are not a bank, and so they aren’t owned by or run for shareholders. Instead, they are owned by their members.
With the company’s history dating back to 1848, Nationwide have an extensive history and reputation in the banking industry.
They offer a range of personal finance products including ISA accounts; however, they do not currently offer a Lifetime ISA product.
What is a Lifetime ISA?
Lifetime ISAs (LISAs) are investment accounts designed for people saving for their first home.
The government supports LISA investors by adding a 25% bonus to all contributions, meaning that for every £4 you put in, you get an extra £1 from HMRC.
However, funds can only be withdrawn from a Lifetime ISA under two conditions: to go towards a deposit for your first home, or at age 60 or over.
What are the pros and cons of a Lifetime ISA?
Pros
- You get 25% added to all your contributions
- Lifetime ISAs are completely tax-free (income and capital gains tax)
- You can invest in Cash LISAs that provide fixed or variable interest rates
- You can invest in Stocks and Shares LISAs that give you access to the entire stock market
- Unlike with Help to Buy ISAs, you get the 25% government bonus straight away meaning you can invest it for additional growth
- If you don’t spend your entire Lifetime ISA on your house deposit you can use it for retirement instead
- You don’t pay income tax when you withdraw from your LISA at retirement like you do with a pension
Cons
- You can only withdraw for a first house purchase or at age 60+
- You are charged 25% for withdrawals that don’t fit these requirements
- There are limitations as to what kind of property purchase LISAs are eligible for (see below)
- You can only add up to £4,000 in the current tax year
What kind of property can I buy with a Lifetime ISA?
Lifetime ISA funds can only be put towards a deposit if it’s your first house purchase, and there are a few other restrictions to keep in mind too:
- You cannot use a LISA if you are a cash buyer and not using a mortgage
- You are limited to a property purchase of £450,000 or less
- You cannot use a LISA for a buy to let property
- You must hold your LISA for at least 12 months before using for a deposit
How much will I be charged for withdrawing from a LISA against the rules?
You are charged 25% for any LISA withdrawals that don’t fit into the withdrawal rules.
At first glance, this seems fair given that you get the 25% bonus from HMRC anyway and the charge just cancels it out.
However, you will actually be charged more than your bonus and get back less than you originally invest, because the charge is applied against your gross withdrawal figure.
LISA Withdrawal Charge Example:
- You contribute up to the maximum LISA limit of £4,000 for two tax years in a row, meaning you put in £8,000.
- HMRC adds 25% to each of your contributions, meaning you get an additional £2,000 taking your total amount invested to £10,000 (excluding any investment fluctuations).
- You then withdraw your £10,000 as an unsolicited withdrawal, and you are charged 25%.
- 25% of £10,000 is £2,500, meaning you only get back £7,500 compared to the £8,000 you originally put in.
- To put this in perspective, the £500 difference represents a -6.25% loss on your Lifetime ISA portfolio (this percentage stays the same no matter how much you’ve put in, disregarding any investment growth).
This shows how important it is to be committed to a property purchase or withdrawing at age 60 if you don’t want to lose a chunk of your savings.
Can you transfer a normal ISA into a Lifetime ISA and get the bonus?
Yes, you can transfer your existing ISAs into a Lifetime ISA and get the 25% government bonus added.
How to transfer your ISA into a Lifetime ISA:
- Download a Lifetime ISA transfer form from your LISA provider’s website, or request one in the post
- Complete the form and return it to your LISA provider
- Your LISA provider will complete your transfer within approximately 6 weeks
- When your transfer completes, you automatically get the 25% bonus added to your account
How do I open a Lifetime ISA?
You can open a Lifetime ISA online via your provider’s website in a matter of minutes.
You’ll need your National Insurance Number to hand, and either your debit card or bank details to make a contribution.
Frequently Asked Questions
Are LISAs tax efficient?
Yes, any dividends, capital gains or withdrawals will be 100% tax-free from a LISA.
Can I contribute to a Lifetime ISA if I have already used my full £20,000 ISA allowance?
No. Your Lifetime ISA allowance counts towards your total annual allowance, so if you have contributed £4,000 to a LISA then you can only contribute a further £16,000 to a standard ISA.
Can I have a Lifetime ISA and a standard ISA?
Yes, you can open a LISA if you already have a Cash ISA or Stocks and Shares ISA.
Can I lose money in a Lifetime ISA?
You will be charged more than the bonus you get if you make a withdrawal against the permitted LISA rules. This is because 25% of your withdrawal after the added government bonus will total more than 25% of your original contribution.
You can also lose money in a Stocks and Shares LISA if your investments fall in value.
Can I open a Lifetime ISA at any age?
No, you must be between the ages of 18 and 39 to open a Lifetime ISA.
Can I transfer my Cash or Stocks and Shares ISA into a Lifetime ISA?
Yes, but your transfer will be treated as a contribution and deducted from your annual £4,000 LISA allowance and so you’ll need to be careful not to accidentally contribute over the limit.
Can somebody else pay into my Lifetime ISA?
No, you can only contribute to your own LISA for tax purposes.
How long can I contribute to a LISA for?
As long as you open a Lifetime ISA account before your 40th birthday you can contribute to a LISA up until the age of 50.
You will have to add money to a LISA to actually open it, in the form of a debit card payment or a Direct Debit contribution.
How much can I contribute to a Lifetime ISA?
£4,000 per person for the 2023/24 tax year.
What happens to my LISA when I die?
If you still hold your LISA when you die, it will form part of your estate and be liable to Inheritance Tax (IHT) just like any other investment.