Savings (Government Contributions) Act 2017 section 3

Income tax treatment of government contributions under section 1 or 2

Section 3 confirms that government bonus payments into Lifetime ISAs and Help-to-Save accounts are exempt from income tax and clarifies how these accounts interact with alternative finance (e.g. Sharia-compliant) arrangements.

• Government bonus payments made under section 1 (Lifetime ISA) or section 2 (Help-to-Save) of the Act are completely free of income tax.
• This exemption is achieved by inserting a new section 775A into the Income Tax (Trading and Other Income) Act 2005, which lists the bonus as exempt income.
• Where a Lifetime ISA or Help-to-Save account would qualify as an alternative finance arrangement (such as a Sharia-compliant product) but for the fact that a government bonus is paid into it, the account is still to be treated as an alternative finance arrangement for tax purposes.
• This ensures that individuals using Sharia-compliant or other alternative finance versions of these accounts are not disadvantaged by the payment of the government bonus.