Are you turning 40 during the 2017/18 tax year?
Be sure to read the special considerations below.
What is the Lifetime ISA?
You can invest up to £4,000 each year in a Lifetime ISA. For each £4 you invest you receive a £1 government bonus.
You can use a Lifetime ISA to buy your first home in the UK for up to £450,000, or you can withdraw it after age 60 or if you are terminally ill without penalty. For all other withdrawals you would pay a 25% withdrawal penalty, which could mean ending up with less than you invested.
As with all investing, your capital is at risk. A Lifetime ISA may not be right for everyone and tax rules may change in the future. If you are unsure if a Lifetime ISA is the right choice for you, please seek independent financial advice.
Will Nutmeg be offering a Lifetime ISA?
Yes, and it's available now.
If I plan to get a Lifetime ISA does that affect the ISA settings I should have?
Don’t worry, even if you use your full ISA allowance at the start of the tax year, you’ll still be able to open a Lifetime ISA during the 2017/18 tax year by transferring from your existing ISA when that functionality becomes available. You’ll still receive the first government bonus that will be paid in April 2018.
If you are turning 40 during the 2017/18 tax year however, be sure to read the special considerations at the end.
If you plan to buy a home using your Lifetime ISA, bear in mind that you must hold a Lifetime ISA for at least 12 months. So if you were to open a Lifetime ISA on 1st August 2017 you would not be able to use it towards a deposit before 1st August 2018.
Here are a few possible scenarios:
You only have investments within your Nutmeg ISA, and none in a general investment account with Nutmeg
You can choose to auto-renew your ISA with any limit you like, and simply open and pay into a Lifetime ISA once it is available. You will be able to pay in up to £4,000 to your Lifetime ISA. The remaining £16,000 of next year’s £20,000 ISA limit could then be contributed to any combination of stocks and shares ISA with Nutmeg, cash ISA or an innovative finance ISA.
- You have £10,000 invested within an ISA at Nutmeg. You keep your settings at Full allowance, Auto-renew and Auto-fill.
- On 6th April we will set you up with a new stocks and shares ISA but would only subscribe money to it if you pay in.
- When it is available, you could set up a Lifetime ISA and pay in directly to that as part of your overall ISA allowance.
- Alternatively, when the functionality is available later in the year, you will be able to move some of your existing ISA money at Nutmeg into a new Lifetime ISA.
You have investments within a ISA and a general investment account with Nutmeg
If you have Auto-fill set to ON, we will move value from your general investment account into your ISA at the start of next tax year up to your ISA limit. If you are planning to get a Lifetime ISA you will be able to move that money into the Lifetime ISA later in the year, when we make it available, without missing out on any tax benefits or government bonus.
If you have autofill set to OFF, you can simply open a Lifetime ISA in the next tax year and pay in up to £4,000 when you wish. If you want to move value from your existing ISA or general investments into the Lifetime ISA you will have to wait until that is available.
- You have £100,000 in your Nutmeg portfolio, of which £40,000 is in an ISA and £60,000 invested outside the ISA wrapper. You have Full allowance set to ON, Auto-renew set to ON and Auto-fill set to ON.
- On 6th April 2017 we will renew your ISA and move the full allowance of £20,000 of your general investments into your ISA. You would not be able to pay into a Lifetime ISA immediately, but would be able to set up a Lifetime ISA and move your ISA investments into it when that functionality becomes available. If you will turn 40 during the year be sure to read below as you could lose out on your eligibility to set up a Lifetime ISA unless you act before your 40th birthday.
Special considerations if you are turning 40 in the 2017/18 tax year
A Lifetime ISA can be opened by people aged 18 and over and under 40. If you do not open and pay into a Lifetime ISA before your 40th birthday you will lose the ability to do so.
If you are turning 40 during the tax year and before we release the functionality to transfer money from an existing ISA into a Lifetime ISA, then you are advised to not fill next year’s ISA completely. You may want to set auto-fill to OFF to ensure that this doesn’t happen.
You will need to open a Lifetime ISA before your 40th birthday. Once you’ve opened a Lifetime ISA, you will be able to contribute to it and/or move money from your stocks and shares ISA or general investment account with Nutmeg into your Lifetime ISA (once we launch this feature later in the year) up until you reach 50 years old.