Like all types of ISA, you’ll be able to use your ISA allowance, which for the current tax year is £20,000, to put money away totally tax-free. In fact, you can save up to £4,000 per tax year into your LISA. One of the main draws of this account is the generous 25% Government bonus you can earn on your savings. So, if you put away the max £4,000, you’ll earn a £1,000 bonus on top every tax year. You’ll earn interest on any savings too.
A word of warning though: if you take out the money before retirement age (60) and aren’t using it to buy your first home, there’s a 25% Government charge on your withdrawal which means you could get back less than you put in. It’s also worth knowing that you can’t use the funds for a home purchase until you’ve held the account for at least 12 months without the 25% Government charge too. This is to encourage you to save for longer periods of time.
Tax-free savings accounts are simple, really: with accounts like these you won’t have to pay tax on the interest you earn. There’s also a cap on how much you can add each tax year, depending on your circumstances, and keep in mind that the tax rules around ISAs could change.