A Lifetime ISA (LISA) is a tax-free savings account that pays a 25% government bonus on contributions of up to £4,000 per year. It is designed for two specific purposes only: buying your first home or saving for retirement. To open one you must be aged 18–39 and a UK resident.
How does the Lifetime ISA work?
You can contribute up to £4,000 per tax year. The government adds a 25% bonus — up to £1,000 per year — paid directly into your account, usually monthly. Both your contributions and the bonus earn interest or investment returns inside the tax-free ISA wrapper. The £4,000 LISA allowance counts toward your overall £20,000 annual ISA allowance — so if you put £4,000 in a LISA, you have £16,000 remaining for other ISA types.
Who can open a Lifetime ISA?
You must be aged 18–39 and a UK resident. You must open the account before your 40th birthday. You can keep contributing until the age of 50, after which the balance continues to grow but no further contributions are allowed.
What can I use a Lifetime ISA for?
Buying your first home. You can use your LISA — including the government bonus — to buy a first home worth up to £450,000. The property must be purchased with a mortgage and you must have held the LISA for at least 12 months before using it. Both you and a partner can each use their own LISA on the same property purchase if you are both first-time buyers.
Retirement. From age 60, you can withdraw your entire LISA balance — contributions, bonus, and any growth — completely tax-free. Used this way it works as a supplement to a pension, without the access restrictions of a pension.
What happens if I withdraw early?
Withdrawing for any reason other than buying a first home or retirement after age 60 incurs a 25% government withdrawal charge on the full withdrawal amount — not just the bonus. This means you can lose some of your own contributions, not just the government top-up. Only withdraw early as a last resort. The only exception is terminal illness.
Cash or Stocks and Shares Lifetime ISA?
A Cash LISA holds your money in savings accounts — better for shorter-term goals like a first home in the next few years. A Stocks and Shares LISA invests in the market — generally better for a longer retirement-focused timeframe, though your money can go down as well as up.
Is the Lifetime ISA under threat?
The government has signalled it may consult on replacing the Lifetime ISA with a new First Time Buyers’ ISA. Nothing has been confirmed. If you’re eligible and considering opening one for a first home purchase, it may be worth doing so while the current product still exists. Check the latest position before applying.
Frequently asked questions
What is the Lifetime ISA bonus?
The government adds a 25% bonus on contributions up to £4,000 per year — a maximum of £1,000 annually. The bonus is paid directly into your LISA account.
Can I use a Lifetime ISA to buy a house?
Yes — if you are a first-time buyer purchasing a property worth up to £450,000, with a mortgage, having held the LISA for at least 12 months.
What is the Lifetime ISA withdrawal penalty?
A 25% government charge on the full withdrawal amount for any unauthorised reason. This can reduce your own contributions, not just the government bonus.
Can I have both a Lifetime ISA and a pension?
Yes — they are completely separate products. Many people use both: a pension for employer contributions and tax relief, and a LISA for the government bonus and flexible access from age 60.
What is the maximum Lifetime ISA property price?
You can use a Lifetime ISA to buy a property worth up to £450,000. Properties above this threshold are not eligible and you cannot use the LISA funds for that purchase.