What is a Lifetime ISA (LISA)?

A Lifetime ISA is a tax-advantaged savings account available to UK residents aged 18-39. You can contribute up to £4,000 per year and the government adds a 25% bonus (up to £1,000/year). The money can be used penalty-free to buy your first home (worth up to £450,000) or withdrawn from age 60 as retirement income. All growth is tax-free.

What is the 25% withdrawal penalty?

If you withdraw money for any reason other than buying your first home or retirement (after 60), you face a 25% government charge on the full amount withdrawn. This charge claws back the government bonus and an extra 6.25% of your own contributions. For example: £100 in + £25 bonus = £125. Withdraw this early and the 25% charge = £31.25, leaving you with £93.75 (you've lost £6.25 of your own money).

Can I use a LISA to buy a home?

Yes, you can use your LISA to buy your first home as long as: (1) the property costs £450,000 or less, (2) you use a mortgage (not a cash purchase), (3) the LISA has been open for at least 12 months, and (4) you use a conveyancer or solicitor. For a joint purchase, both parties can each use their own LISA.

Can I have a LISA and a Help to Buy ISA?

You can have both, but you can only use the government bonus from one of them to buy your first home. Since the Help to Buy ISA scheme is closed to new applicants (from November 2019), most new savers should focus on the LISA. The LISA generally offers a better deal due to the higher annual contribution limit (£4,000 vs £200/month) and the higher property price limit.

Does the LISA count towards my ISA allowance?

Yes, the £4,000 LISA limit counts as part of your overall £20,000 annual ISA allowance. So if you contribute £4,000 to a LISA, you can put up to £16,000 in other ISA types in the same tax year.

Savings & Investments

Lifetime ISA Calculator

See how the 25% government bonus supercharges your savings for a first home or retirement. Up to £1,000 free money per year.

Updated April 2026

Your details

Purpose

Penalty-free use on first home up to £450,000

Current age

Must be 18–39 to open a Lifetime ISA

Age when buying property

Annual contribution

Maximum £4,000 per year. Bonus capped at £1,000/year.

Annual growth rate

Use 0% for a Cash LISA; 5-7% for a Stocks & Shares LISA

Your results

£4,000/year LISA, Buying a Home at Age 30

Final LISA value

£29,010

Government bonus

£5,000

Your contributions: £20,000
Investment growth: £4,010
Final LISA value: £29,010

Breakdown

Your contributions: £20,000 over 5 years
Government bonus (25%): +£5,000
Investment growth at 5%: +£4,010
Final LISA value at age 30: £29,010

Year-by-year breakdown

Age	Contribution	Bonus	Growth	Value
26	£4,000	+£1,000	+£250	£5,250
27	£4,000	+£1,000	+£513	£10,763
28	£4,000	+£1,000	+£788	£16,551
29	£4,000	+£1,000	+£1,078	£22,628
30	£4,000	+£1,000	+£1,381	£29,010

Related calculators

ISA Calculator Pension Calculator State Pension Calculator Savings Goal Calculator Help to Buy Equity Loan Calculator

Frequently asked questions

Savings & Investing Guide

How Lifetime ISAs work

A Lifetime ISA (LISA) is a government-backed savings and investment account with a 25% bonus on your contributions. It can be used for two purposes only: buying your first home, or saving for retirement from age 60. The generous bonus makes it one of the most powerful savings tools available to eligible UK adults, but the withdrawal rules are strict, so understanding them before committing is essential.

The 25% government bonus

For every £4 you pay in, the government adds £1, a 25% bonus paid monthly directly into your account. You can contribute up to £4,000 per tax year, so the maximum annual bonus is £1,000. Over a 32-year saving period (opening at 18 and first accessing at 50, with the full £4,000 paid in each year), the cumulative bonus alone could exceed £32,000 before any investment growth. The bonus counts toward your overall £20,000 ISA annual allowance, so contributing £4,000 to a LISA leaves £16,000 for other ISA types.

Eligibility: who can open one

You must be aged between 18 and 39 to open a Lifetime ISA. Once open, you can continue paying in until the day before your 50th birthday. You must be a UK resident. There is no minimum contribution, and you can stop and restart contributions freely. If you are buying a home jointly, both buyers can each hold their own LISA and each use their bonus toward the same purchase, potentially combining two bonuses of up to £33,000 each (£1,000/year over up to 33 years), though both accounts must have been open for at least 12 months before use.

Using a LISA to buy your first home

To use a LISA for a property purchase, your account must have been open for at least 12 months. The property must cost £450,000 or less, be bought with a mortgage (you cannot use it for a cash purchase), and be your main residence, not a buy-to-let. You must be a first-time buyer; if buying jointly, both buyers must be first-time buyers. The funds are transferred directly to your conveyancer at completion via the LISA conveyancer portal, and you cannot withdraw the money yourself and then use it for a purchase.

Using a LISA for retirement

From age 60, you can withdraw all of your LISA savings, including the government bonus and any investment growth, completely free of tax. Unlike a pension, there is no requirement to buy an annuity or take a specific income; the full pot is yours to use however you wish. For higher-rate taxpayers, a pension is usually more tax-efficient because contributions receive relief at your marginal rate (40% or 45%), whereas the LISA bonus is fixed at 25%. For basic-rate taxpayers, the LISA and pension are broadly equivalent in tax terms, though pensions benefit from employer contributions if available.

The withdrawal penalty: what happens if you withdraw early

If you withdraw from a LISA for any reason other than buying a qualifying first home or reaching age 60 (or terminal illness), a 25% government withdrawal charge applies to the full amount withdrawn. This charge is calculated on the withdrawal amount including the bonus, so withdrawing £100 (which includes £20 of bonus) costs £25, leaving you with just £75. In effect, you lose the bonus and pay an additional penalty of approximately 6.25% of your own original contributions. This makes the LISA unsuitable as a general emergency fund; only contribute money you are confident you will not need before retirement or a qualifying home purchase.

Sources & methodology

Built and maintained by Tim, a personal finance enthusiast (not a financial adviser). Last reviewed April 2026. Rates and thresholds come from official UK government publications.

GOV.UK: Individual Savings Accounts · ISA allowances, types and eligibility rules
HMRC: Lifetime ISA · LISA bonus, withdrawal rules and limits

Figures are estimates only. This is not financial or tax advice. For help with your specific situation, speak to HMRC or a qualified adviser.