What can it be used for?
Lisas have been designed with two specific, but unrelated, purposes in mind. One is to help fund a first-time property purchase, the other is as a quasi-pension to provide income in retirement. If withdrawals are made for other purposes in the account holder’s lifetime Lisa then a penalty applies. The only exception is for those with less than 12 months to live.
House purchase
There are a few criteria for using Lisas for property purchase, so care is needed to avoid tripping up.
First, the Lisa needs to have been funded for at least twelve months before a charge-free withdrawal can be made.
It is important that account holders are aware of this if they are planning a property purchase in the near-term.
If you have clients under 40, who are potentially looking to buy on a first-time basis, then they could consider opening a Lisa with a minimum deposit to start the clock ticking, even if they only put in the balance to £4,000 once they have found a property to buy.
In terms of the property itself, it must be in the UK with a purchase price of £450,000 or less. Unlike with help-to-buy Isa there is no differential between London and the rest of the country.
There must be a mortgage being used to purchase the property and the Lisa holder must be intending to live in the property on completion. The only exception to this last rule is for crown employees working abroad, who can purchase UK property to let on condition that they use it to live in when they return to the UK.
The Lisa holder cannot have owned property previously – be that in the UK or anywhere else in the world. This includes property they have inherited and is regardless of how small a share of the property they may have had.
It is possible for two or more people to come together to purchase the property. It is only the Lisa holder that needs to be a first-time buyer, so if they wish to purchase a property jointly with a partner who as previously owned, this does not stop them using their Lisa for their share.
If property is being purchase between two or more people that are both/all Lisa holders who are first-time buyers, then they can all use their Lisas to help with the purchase. One advantage the Lisa has over the help-to-buy Isa is that as the bonus is paid monthly it can be used for the deposit of the property at exchange.
