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Lifetime ISA explained

How the 25% bonus works, who can open one and when you can take the money out.

The short answer

A Lifetime ISA (LISA) lets you pay in up to £4,000 a year and the government adds a 25% bonus, up to £1,000 a year. You can use the money to buy your first home or save for later life. You must open it before you turn 40, and you can pay in until you are 50. The £4,000 counts towards your £20,000 ISA allowance.

How the bonus works

For every £4,000 you pay in, you get £1,000 added. That is an immediate 25% on your money. Over the maximum ten or so years of saving that can add up to a lot, and it is tax-free like any ISA. You can hold cash or investments inside it.

When you can use it without a penalty

  • First home: to buy your first home, as long as the property is within the price cap (£450,000 when we last checked, so confirm on GOV.UK), you use a conveyancer, and the account has been open for at least 12 months.
  • From age 60: you can take the money out for any reason.
  • If you are terminally ill with less than 12 months to live.

If you take the money out at any other time, you pay a 25% withdrawal charge. That takes back the bonus and also a little of your own money, so you can end up with less than you put in.

LISA or pension?

If you are saving for retirement, a workplace pension often wins, especially if your employer adds money. The LISA bonus is 25%, but employer contributions and tax relief in a pension can be worth more. A LISA can make sense for a first home, or as an extra for retirement flexibility, since you can access it at 60. See the pension calculator.

Points to check

  • If you might need the money before you are 60 and are not buying a first home, the 25% withdrawal charge makes a LISA a poor fit.
  • Interest rates on cash LISAs vary, and not every provider offers one.
  • Check the current house price cap on GOV.UK.

Where to learn more

This guide is for information only and is not financial advice.

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