Interest Calculator Lifetime ISA

Lifetime ISA Formula:

\[ A = P \times (1 + R / n)^{(n \times T)} + \text{Government Bonus} \]

Principal (P):

GBP

Annual Interest Rate (R):

Decimal

Compounding Frequency (n):

per year

Time (T):

years

Government Bonus:

GBP

Maturity Amount (A):

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1. What is the Lifetime ISA Interest Formula?

The Lifetime ISA (Individual Savings Account) formula calculates the maturity amount including compound interest and government bonus. It helps estimate the future value of savings in a UK Lifetime ISA account.

2. How Does the Calculator Work?

The calculator uses the Lifetime ISA formula:

\[ A = P \times (1 + R / n)^{(n \times T)} + \text{Government Bonus} \]

Where:

\( P \) — Principal amount (GBP)
\( R \) — Annual interest rate (decimal)
\( n \) — Compounding frequency per year
\( T \) — Time in years
Government Bonus — Additional government contribution (GBP)
\( A \) — Maturity amount (GBP)

Explanation: The formula calculates compound interest on the principal amount and adds the government bonus to determine the total maturity value.

3. Importance of Lifetime ISA Calculation

Details: Accurate calculation of Lifetime ISA maturity helps in financial planning, understanding the benefits of government bonuses, and comparing different savings options for first-time home buyers and retirement savers.

4. Using the Calculator

Tips: Enter principal in GBP, annual interest rate as decimal (e.g., 0.05 for 5%), compounding frequency (typically 1 for annual, 12 for monthly), time in years, and government bonus in GBP. All values must be valid positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is the maximum government bonus for Lifetime ISA?
A: The UK government provides a 25% bonus on contributions up to £4,000 per tax year, with a maximum bonus of £1,000 per year.

Q2: Who is eligible for a Lifetime ISA?
A: UK residents aged 18-39 can open a Lifetime ISA to save for their first home or retirement.

Q3: What are the withdrawal rules for Lifetime ISA?
A: Funds can be withdrawn tax-free for a first home purchase (up to £450,000) or after age 60. Other withdrawals typically incur a 25% penalty.

Q4: How does compounding frequency affect returns?
A: More frequent compounding (e.g., monthly vs annually) results in higher returns due to the effect of compound interest.

Q5: Can I contribute to both a Lifetime ISA and other ISAs?
A: Yes, but the total ISA contribution limit applies across all types (£20,000 for 2023/2024 tax year).