The Lifetime ISA is targeted at people between the ages of 18 and 40 years old, and a government bonus will be paid on amounts saved in a Lifetime ISA. The annual limit for in-year savings is currently £4,000.

HMRC confirmed that 'it is possible for two married individuals to have Lifetime ISAs as they are individual Savings Accounts so they are not held jointly'.

The bonus is calculated at 25% of the qualifying additions made to the account during the current year payment period.

The measure is expected to cost the government nearly £1bn a year once it is fully operational, with an expected cost to the Treasury of £830m by 2020-21.

The government views the Lifetime ISA as a way for people to save for their first home purchases and for their pensions. It will be possible to make withdrawals from an account without any charge, in certain circumstances. Withdrawals can be made without charge after the account holder reaches 60, effectively from 2037 onwards.

When used for a property purchase, the Lifetime ISA can be used for purchases up to £450,000 and apply only to first-time purchases.

Any funds that are extracted from a Lifetime ISA before the age of 60 and which are not used for a property will attract tax on the bonus element and will be subject to a charge of 25%. The draft rules set out the information returns account providers must give to HMRC. These include a requirement to amend incorrect returns, and powers for HMRC to enquire into returns, as well as a penalty system for any late tax payments.

From 5 April 2017, amounts held in a Help to Buy: ISA can also be transferred to a Lifetime ISA during 2017-18 and will earn a government bonus, without this transferred amount counting towards the £4,000 Lifetime ISA annual limit.

The draft legislation amending the Individual Savings Account (ISA) Regulations to establish Lifetime ISA, includes rules in relation to the government bonus payable on Lifetime ISA savings and withdrawals from accounts.

The schedule sets out details of conditions that must be satisfied for a withdrawal in relation to the first-time purchase of a residence not to be subject to a charge.

This includes the withdrawn amount must be paid to the account holder’s conveyancer, and requirements in relation to the value of the residence (which must be no greater than £450,000); the use of the funds (which must be applied to the house purchase); what constitutes a first-time purchase; and the process and information requirements that must be met by an account holder and their conveyancer in relation to such a withdrawal.

Withdrawn funds must be returned to a Lifetime ISA if a purchase has not been completed within 90 days of these funds being received by the conveyancer. There will be a withdrawal charge due on any funds earmarked for an exchange of contract which falls through and then is not returned.

It is intended that these regulations, which are being published in draft for consultation, will amend the ISA Regulations (S.I.1998/1870) from 6 April 2017 to establish Lifetime ISA, including the rules in relation to the government bonus and withdrawals from accounts.

The draft regulations will also increase the overall ISA limit from £15,240 to £20,000 from 6 April 2017.

This technical consultation will be of interest to ISA investors, potential providers of Lifetime ISA, and conveyancers acting for individuals purchasing their first home.

HMRC has published draft regulations together with a draft explanatory memorandum for a period of technical consultation, which will close on 6 January 2017.

The Lifetime ISA was first announced at Budget 2016.

Any comments on these draft regulations should be sent by email to [email protected]

The HMRC consultation, Draft legislation: Lifetime ISA, is available here