Lifetime ISAs and the tax year: What you need to know
Anya GairIf you’ve got a Lifetime ISA, or are about to open one, understanding how the tax year impacts what you can put into your LISA is important to ensure you max out your free government bonus! Keep reading to find out how Lifetime ISA works in relation to the tax year, and how long you have till the tax year ends.
When is the tax year?
The tax year runs from the start of April each year, normally from the 6th. So the 2024/25 tax year starts on the 6th April 2024 and finishes on the 5th April 2025. The 2025/2026 tax year will then start on the 6th April 2025.
How much can you put into a Lifetime ISA each tax year?
You can put up to £4,000 into your Lifetime ISA each tax year, and get up to £1,000 from the government as a free 25% bonus on top of your savings. If you can’t put in £4,000 into your Lifetime ISA before the tax year ends, you'll get 25% from the government on top of whatever you put in.
The £4,000 allowance and the 25% bonus will be the same in the new tax year which starts on the 6th of April. So if you can’t top up your Lifetime ISA before this tax year ends, it isn't your last chance to get the government bonus. It's just your last chance to make the most of the current tax year's allowances and bonuses. Each year's allowance doesn’t cross over into the next, so if you put £3,000 into your LISA this tax year, you can’t put £5,000 into your LISA next tax year.
Make the most of your ISA allowance!
🚨 Already maxed out your LISA for this tax year? Your Lifetime ISA is part of your overall £20,000 annual ISA allowance, so if you’ve already saved £4,000 into your LISA you can put any other savings into other ISAs in the same tax year. Just make sure not to contribute more than £20,000 across all your accounts 🚨
When is the Lifetime ISA tax year deadline?
The tax year ends on the 5th April 2025, so you need to make sure any money you want to put into your Lifetime ISA is processed by then. This might mean the last date you can transfer money into your Lifetime ISA is before the 5th of April.
For example, with the Tembo Lifetime ISA, you have until 9pm on the 5th April 2025 to add money to your account as a one-off contribution in order for it to be processed by the tax year end.
If you’d rather add money to your Lifetime ISA via monthly direct debit, the 21st March 2025 is the last date you can set up a brand new direct debit, or edit the amount or change the date of an existing one. That’s because the last direct debit collection date for this tax year is the 1st April 2025.
Although the tax year doesn't technically end until the 5th April, these deadlines mean we can make sure we have time to process and log your LISA payments for this tax year. Any payments made after 5pm on the 4th April won't be processed before tax year end.
Missed the deadline?
You can use top-ups in the Tembo app all the way up until the 4th April to get in your final contributions for the tax year!
Is the Lifetime ISA bonus paid per tax year?
The Lifetime ISA bonus is paid monthly, so it doesn’t matter if you put the maximum £4,000 in one-go, or drip feed it in across a couple of months as the bonus you receive across the tax year will be the same. You just need to make sure you’ve put in all the savings you can before the end of the tax year to get the maximum government bonus for that tax year. Once the tax year starts again, you can add up to another £4,000 to your LISA and get another 25% bonus on top of your savings from the government.
When considering opening a LISA, remember that withdrawals for any purpose other than buying a first home or for retirement will incur a 25% government penalty, meaning you may get back less than you paid in.
Save for your first home with the market-leading Cash Lifetime ISA
Open a Tembo Lifetime ISA today with just £1 to benefit from our 4.75% (AER) variable interest rate, or transfer from another provider. There's no introductory rates that drop after year one, and no fees.
