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'Gifted a buy-to-let property by my parents. Am I still eligible for a Lifetime Isa?'

The Telegraph logo The Telegraph 22/03/2019 Sophie Smith
One step closer: the Lifetime Isa offers a bonus to people buying their first property © Nick White/Getty Images One step closer: the Lifetime Isa offers a bonus to people buying their first property

I recently opened a Lifetime Isa, as my girlfriend and I are thinking of buying a house in the next couple of years and I want to take advantage of the government bonus.

However, my girlfriend was gifted a buy-to-let property by her parents two years ago, and as far as I’m aware her name is on the lease. Does that mean she is no longer considered a first-time buyer and is not eligible for her own Lifetime Isa?

LP, Herts 

It is a good idea for you to have a Lifetime Isa if you’re planning to buy a property. The tax-free account can be opened by anyone aged between 18 and 40.

You can save up to £4,000 each year and benefit from a 25pc government bonus. While this sounds generous, there are restrictions on when you can access the money.

The savings inside the Lifetime Isa can only be withdrawn tax-free if they are used to buy a first home, or from the age of 60, when the money can be put towards retirement. The only exception to this applies to those who are diagnosed with a terminal illness.

© Ken Drysdale

If the funds are accessed for any other reason, a penalty of 25pc will be applied to the withdrawal amount. This is taken from the bonus money as well as your own contributions, which means you could end up with 6.3pc less than you paid in.

Unfortunately, your girlfriend won’t be considered a first-time buyer because she already has an ongoing beneficial interest in a property, even if she isn’t living in it, says Patrick Connolly, of financial advice firm Chase de Vere.

So, while your girlfriend can take out a Lifetime Isa (assuming she is aged between 18 and 40), she will only be able to access the money after the age of 60, or she will be hit with the 25pc penalty

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