A Lifetime ISA is an Individual Savings Account for saving towards a first home or later life. You can pay in up to £4,000 each year and receive a 25% government bonus, up to £1,000 per year.
Lifetime ISA in plain English
A Lifetime ISA, often shortened to LISA, is a special type of ISA designed for two main goals: buying your first home or saving for later life.
You can pay in up to £4,000 each tax year until you turn 50, provided you made your first payment before age 40. The government adds a 25% bonus to what you save, up to a maximum bonus of £1,000 per year.
The £4,000 Lifetime ISA limit counts towards your wider annual ISA allowance. For example, if the overall ISA allowance is £20,000 and you put £4,000 into a Lifetime ISA, you could still use the remaining £16,000 across other ISA types.
You can hold cash, stocks and shares, or a mix of both inside a Lifetime ISA. Cash may be more suitable for shorter house-deposit goals. Stocks and shares may be more suitable for longer-term goals, but they can fall in value.
The biggest drawback is access. If you withdraw for a reason that does not qualify, a 25% withdrawal charge normally applies. That can leave you with less than you personally paid in, especially if there has been no growth.
Calculate your Lifetime ISA saving plan
Use the ISA calculator to model Lifetime ISA contributions, annual bonus, remaining ISA allowance and possible long-term growth.
ISA Calculator
Estimate LISA contributions, bonus and projected account value.
Who can open a Lifetime ISA?
To open a Lifetime ISA, you must be at least 18 and under 40. You must also normally be UK resident, or qualify through armed forces or Crown servant rules.
You can keep paying into a Lifetime ISA until age 50. After 50, the account can stay open and still earn interest or investment returns, but you cannot keep paying in or receive the government bonus.
Using a Lifetime ISA to buy a first home
You can use Lifetime ISA savings and the bonus towards your first home if the property costs £450,000 or less and the purchase happens at least 12 months after your first LISA payment.
The money must normally be paid by the ISA provider to your conveyancer or solicitor, and you must be buying with a mortgage.
| First-home condition | Rule |
|---|---|
| Property price | £450,000 or less. |
| Waiting period | At least 12 months after first payment into the Lifetime ISA. |
| Buyer status | You must be a first-time buyer. |
| Purchase process | Funds are paid to your conveyancer or solicitor. |
Lifetime ISA withdrawals and charges
You can usually withdraw Lifetime ISA money without the 25% charge if you are buying your first home under the qualifying rules, are aged 60 or over, or are terminally ill with less than 12 months to live.
Withdrawals for other reasons normally face a 25% charge. Because the charge applies to the full amount withdrawn, including the government bonus, it can remove more than just the bonus.
Example: if you save £800 and receive a £200 bonus, the pot is £1,000 before growth. A 25% withdrawal charge would be £250, leaving £750.
Cash Lifetime ISA vs Stocks and Shares Lifetime ISA
Some providers offer cash Lifetime ISAs, while others offer investment Lifetime ISAs. The right choice depends on timeframe and risk tolerance.
| Type | Best suited to | Main risk |
|---|---|---|
| Cash Lifetime ISA | Shorter-term house deposit goals where stability matters. | Interest may not keep up with inflation. |
| Stocks and Shares Lifetime ISA | Longer-term saving where you can accept market ups and downs. | Investments can fall in value. |
Common Lifetime ISA mistakes
- Opening too late: you must make your first payment before you turn 40.
- Assuming it is fully flexible: non-qualifying withdrawals normally trigger a 25% charge.
- Ignoring the first-home price cap: the home must cost £450,000 or less to qualify.
- Using investment risk for a short deadline: a stocks and shares LISA can fall just before you need the deposit.
- Forgetting the 12-month rule: you must wait at least 12 months after your first payment before using it for a qualifying home purchase.
- Confusing LISA and Help to Buy ISA bonuses: you can only use the government bonus from one of them for a first-home purchase.