Martin Lewis warns everyone under 40 not to miss out on a £1,000 a year bonus

MARTIN Lewis has urged Brits under the age of 40 to make the most of a yearly £1,000 government bonus.

The cash is available through the Lifetime Isa (Lisa), which pays a bonus if you use the savings towards your first home or retirement.

1

Writing in his weekly , Martin said: "If you hope to buy your first home in the next 10 years, put £1 in a Lisa now.

"Lifetime Isas give first-time buyers a 25% bonus (up to £1,000 a year) on their savings, but only after it's been open a year.

"So open one with £1 now, to start the clock, so it's usable if/when needed."

Lisa accounts are open to anyone aged 18 to 39 and you can keep saving in one until you are 50-years-old.

You can save up to £4,000 each tax year and the government will then add a 25% bonus, effectively giving you free money.

For example, if you save £1,000 a year, the government will add in £250, and if you save the full £4,000 you'll get an extra £1,000 on top.

If you opened a Lisa at age 18 and saved the maximum amount for 32 years you'd get £32,000 of free government cash.

The £4,000 savings limit counts towards your overall Isa cap, which is £20,000 for 2020/2021.

With the current tax year set to end next month on April 5, it could be worth setting up an account.

With a Lisa, you can buy homes worth up to £450,000 in London and £250,000 outside London.

However, you'll be charged a 20% fee of the amount withdrawn - including the bonus - if you want to use it for something other than its specific purposes or if you buy a home above the threshold.

This penalty was cut from 25% due to the pandemic, but it's set to revert back to 25% from April 5.

The reduction effectively means that while you lose out on the bonus, you'll currently get back your own savings.

If you do decide to use the government top-up on your Lisa to buy a house, you won't be able to get it again when you retire.

If you've already opened up a Help to Buy Isa, you can't use a Lifetime Isa for a first home too.

Keep in mind you're also restricted to saving into just one Cash Isa per tax year.

You can check out for more information.

Most read in Money

SWEET DEAL

Supermarket slashes price of bigger & cheaper Quality Street tins sold at Tesco

CASH IN

All the freebies and discounts you can claim on Universal Credit in January

CHOC A LOT

Supermarket giant slashes Quality Street to £1.50 and it's the cheapest around

LAST ORDERS

Full list of TV chefs that have shut down Michelin-hailed restaurants this year

One Sun reader has explained how they used the scheme to buy their first home.

READ MORE SUN STORIES

FOG SAKE

Major UK airport warns of MORE flight delays today as thick fog sweeps Britain

XMAS NIGHTMARE

My wife died after a beautiful Boxing Day - trying to protect our daughters

It comes after the government pulled the Help to Buy scheme in favour of the Lifetime Isa.

Looking to buy your first home? Check out our first-time buyer guide.