Lifetime ISA guide
Learn how the 25% bonus works and when a Lifetime ISA makes sense.
What is a Lifetime ISA?
A Lifetime ISA (LISA) is a savings or investment account designed for two goals: buying your first home or saving for retirement. The government adds a 25% bonus on everything you pay in, up to £4,000 per tax year. That means up to £1,000 of free money each year.
The £4,000 counts toward your overall £20,000 ISA allowance. You can open a LISA between ages 18 and 39, and you can keep paying in (and receiving the bonus) until you turn 50.
You can hold a cash LISA or a stocks & shares LISA. The rules and bonus are the same either way.
The 25% bonus
Pay in £4,000 in a tax year and the government adds £1,000. Every year you max it out, you get that full bonus.
Bonuses are paid monthly, so you do not have to wait until the end of the tax year. You also earn interest (on a cash LISA) or investment growth (on a stocks & shares LISA) on the bonus itself.
Over several years, that bonus adds up. Someone who contributes the maximum from age 25 to 39 could receive up to £15,000 in government bonuses alone, before any growth.
Using it for your first home
You can withdraw penalty-free to buy your first home if the property costs up to £450,000, your LISA has been open for at least 12 months, and you buy with a mortgage.
If you are buying with a partner and you are both first-time buyers, you can each use your own LISA on the same home. That could mean two bonuses working together toward your deposit.
Using it for retirement
From age 60, you can withdraw everything penalty-free for any purpose. You do not have to buy a home or prove anything. The money is yours to use however you want.
The withdrawal penalty, explained honestly
Any withdrawal that does not qualify (not a first home, and you are under 60) costs you a 25% penalty on the amount withdrawn. This claws back the government bonus and takes a slice of your own money too.
Here is a worked example. You pay in £800. The bonus brings your balance to £1,000. You withdraw the full £1,000 for a non-qualifying reason. The penalty takes £250, leaving you with £750. That is £50 less than you paid in.
Because of this, a LISA only makes sense if you are confident you will use it for a first home or leave it until 60. Treat it as money you are locking away for one of those two purposes.
Cash LISA or stocks & shares LISA?
If you are saving for a home purchase within about five years, a cash LISA is usually the safer choice. Your balance will not fall if markets dip right before you need the money.
If retirement is decades away, a stocks & shares LISA may suit you better. You have time to ride out market ups and downs, and long-term growth could outpace cash interest.
You can see current LISA rates and providers on our comparison page. For a deeper look at the cash versus investment trade-off, read our cash ISA vs stocks & shares ISA guide.
Worth knowing
The government has confirmed it is working on a new first-time buyer ISA product, likely from April 2027, that may eventually replace the LISA. The details are not final yet. Check the latest rules on GOV.UK before opening a LISA, especially if you are mainly interested in the first-home bonus.
Related guides
This is general information, not financial advice. Check GOV.UK for official details that apply to your situation.