Today is 5th April, one of the most critical days in the UK’s financial calendar. It’s the end of the tax year which means that at 12 o’clock tonight, a raft of changes to the tax regime will come into force and you’ll lose any unused tax-free allowances for the 2018/19 financial year.
This includes your ISA allowance, which stands at £20,000 for the 2018/19 tax year. Unlike some other allowances and reliefs, taxpayers cannot carry over any unused ISA allowances into the next tax year. It’s a use it or lose it benefit. And that also applies to the newly introduced Lifetime ISA, or LISA for short.
£1,000 a day
If you’ve not already used your LISA allowance for the 2018/19 tax year, now’s the time to do it because if you do, you could pick up an extra £1,000 for just a day’s work.
There’s £1,000 of free cash lying on the table for any investors who contribute up to a maximum of £4,000 into there LISA today. But, I repeat, if you don’t take advantage of this offer today, you’ll lose it.
LISA’s are a relatively new financial products, and they’ve been slow to take off. This tax-free wrapper works similarly to the traditional ISA although there are some key differences. The biggest of these is the fact that you can only use LISA cash for two specific purposes, buying a property or saving for retirement.
Only first-time buyers can use the cash to help with a deposit for a residential property. The other key difference between a LISA and traditional ISA is that the government adds a 25% bonus on every £1 you put in. So, if you max out the £4,000 limit, the government will contribute an extra £1,000 boosting your savings pot to £5,000.
Even better, the same bonus is available every year so, if you open a LISA at age 18 and contribute to the full £4,000 every year, by age 50 (when the government stops contributing) the maximum bonus you will receive is £33,000 — who wouldn’t want £33,000 of free cash?
Outperforming the market
Considering the fact that over the past few decades, the FTSE 100 has produced an average annual return for investors in the region of 8%, including dividends, an immediate 25% boost on your cash from the government makes a lot of financial sense.
In fact, these numbers suggest you could beat the market even without investing if the government is contributing 25% a year.
Free cash
So, that’s how you can pick up a free cash lump sum of £1,000 today with almost no effort on your part. The great news is, when the new tax year starts tomorrow, you can use the same benefit again, which means savers can pick up £2,000 worth of free cash over the next two days (there may be some delay before the bonus is paid).
If you’ve not made the most of your LISA allowance for this tax year, what are you waiting for?