A Lifetime ISA lets you save up to £4,000 a year towards your first home, with the government adding a 25% bonus on top, worth up to £1,000 per year. You must be aged 18 to 39 to open one, the property you buy must cost no more than £450,000, and the account must be open for at least 12 months before you use it.
What Is a Lifetime ISA?
The Lifetime ISA, commonly shortened to LISA, is a government-backed savings account designed for two purposes: buying a first home and saving for retirement. As a first-time buyer, the first of those is the one that matters to you.
You save money into the account, and the government adds 25% on top. Save £4,000 in a tax year and you receive a £1,000 bonus. The interest your savings earn is also free from tax, as with any ISA. The bonus is paid monthly by HMRC, so it builds up alongside your savings rather than arriving only when you buy.
The LISA launched in 2017 and has grown steadily in take-up. According to HMRC, around 976,000 accounts were actively subscribed to in 2023/24, up 27% on the previous year, and savers put in £2.35 billion across that period, the highest annual total since the scheme began.
How It Works
You can open a LISA with a bank, building society, or investment platform that offers them. There are two types: cash LISAs, which work like a standard savings account, and stocks and shares LISAs, where your money is invested. For most first-time buyers saving over a shorter horizon, a cash LISA is the lower-risk option. Stocks and shares LISAs can offer higher potential growth over a longer period, but the value can fall.
The annual contribution limit is £4,000. This sits within the overall ISA allowance, which is £20,000 in the current tax year. That means you can put £4,000 into a LISA and up to £16,000 into other ISAs, such as a cash ISA or a stocks and shares ISA, in the same tax year.
The 25% bonus is paid on whatever you contribute, up to £4,000. You can’t contribute more than £4,000 in a single tax year, and you stop receiving the bonus at age 50.
| Feature | Detail |
|---|---|
| Annual contribution limit | £4,000 |
| Government bonus | 25% (up to £1,000 per year) |
| Overall ISA allowance | £20,000 |
| Maximum property purchase price | £450,000 |
| Minimum account age before use | 12 months |
| Age to open | 18 to 39 |
| Bonus paid until | Age 50 |
To use your LISA to buy a home, the property must cost £450,000 or less, you must be buying with a mortgage, and the account must have been open for at least 12 months. The funds are paid directly to your conveyancer at completion, not to you.
Who It’s For
If you’re a first-time buyer in the UK, a LISA is one of the most straightforward ways to get free money towards your deposit. The 25% top-up is unmatched by any standard savings account, and the tax-free interest means your money works harder than it would in a typical current or savings account.
You’re eligible if you’re aged between 18 and 39, have never owned a property anywhere in the world, including through inheritance or joint ownership, and intend to buy a home costing no more than £450,000. That price cap is fine for most buyers outside London and the South East, but it’s worth checking local market prices before committing, because the penalty for buying above the cap is steep.
Buying with a partner? You can each open a LISA and use both towards the same property, doubling the bonus available. That’s up to £2,000 in government money per year between you, or £10,000 over five years if you both save the maximum. Importantly, if your partner has previously owned a property, they can’t use their own LISA for the purchase, but yours remains valid. You can read more about the implications of buying jointly in our guide to things to consider before a joint mortgage.
The LISA is less useful if you’re planning to buy quickly. Because the account must be open for at least 12 months before you can use the funds, opening one the month before you find a property won’t help you. Open it as early as possible, even if you only put in a small amount initially.
Only 17% of first-time buyers currently use a Lifetime ISA, despite the fact that LISA users tend to buy their first home at an average age of 29.2, compared to 32 for first-time buyers who don’t use one. That’s a meaningful difference, and the bonus is a significant factor.
Key Benefits
The headline benefit is simple: the government gives you 25p for every £1 you save, up to £1,000 a year. Over five years of maximum contributions, that’s £5,000 in bonuses on top of your own £20,000 in savings. No savings account or cash ISA comes close to that return.
Beyond the bonus, the tax-free wrapper means any interest you earn doesn’t count towards your personal savings allowance. For higher-rate taxpayers, that’s an additional gain.
There’s also the flexibility of splitting your contributions over the year. You don’t have to deposit £4,000 in one go. You can drip-feed money in when you can afford to, and the bonus applies to whatever you contribute.
If you’re buying with another first-time buyer, the combined bonus potential makes the LISA even more powerful. Two buyers, each saving the maximum, receive up to £2,000 in bonuses per year between them.
Key Drawbacks
The biggest drawback is the withdrawal penalty. If you take money out of a LISA for any reason other than buying a qualifying first home, reaching age 60, or a terminal illness diagnosis, you face a 25% charge on the full withdrawal amount, including the bonus. Because the charge applies to the entire withdrawal and not just the bonus portion, you lose all of the government bonus and an additional 6.25% of your own contributions. If you saved £4,000 and received a £1,000 bonus, you’d receive back only £3,750 after the penalty. That’s a real loss of your own money.
The property price cap of £450,000 catches some buyers out, particularly in London and the South East where average prices regularly exceed that figure. If you find a home above the cap, you can’t use your LISA without paying the penalty. This is one of the scheme’s most criticised features, and it’s a genuine risk for buyers in higher-cost areas.
You also can’t use a LISA to buy without a mortgage. Cash buyers, however rare among first-time buyers, are excluded.
The cumulative total of penalty charges collected since the LISA launched reached approximately £315 million by April 2025, which reflects just how often savers are caught by the rules, whether through a change in circumstances, a property priced above the cap, or simply not understanding the restrictions when they opened the account.
Common Misconceptions
“I can open a LISA at any age.” You can’t. You must open the account before your 40th birthday. Many people assume this means they need to be under 40 when they buy, but the restriction applies to opening the account. If you open one at 39 and buy your first home at 42, you can still use it.
“The bonus is paid when I buy.” It isn’t. The bonus is paid monthly by HMRC on your contributions. It accumulates in your account over time. By the time you buy, the bonus is already sitting in your LISA alongside your savings.
“A LISA counts as my whole ISA allowance.” It doesn’t. The £4,000 LISA limit is part of the £20,000 overall ISA allowance, not a replacement for it. You can hold a LISA and other ISAs in the same tax year.
“If my partner has bought before, I can’t use my LISA.” Not true. Your LISA is assessed on your own eligibility, not your partner’s history. If you’re a first-time buyer, you can use your LISA even if you’re buying jointly with someone who has previously owned property.
“I can withdraw the money if I change my mind.” Technically yes, but at a cost. Withdrawing for a non-qualifying reason triggers the 25% penalty, which means you lose not just the bonus but part of your own savings. This catches a significant number of savers: 64% of all LISA withdrawals in 2023/24 were classed as unauthorised, meaning the penalty applied.
Our guide to buying your first home covers the broader steps of the purchase process, including how your deposit fits into the timeline.
What’s Changing: The First-Time Buyer ISA
The LISA isn’t going to exist in its current form indefinitely. The government announced in June 2026 that it plans to replace the Lifetime ISA with a new First-Time Buyer ISA, with a proposed launch date of April 2028.
The key changes under the proposed new product are significant. The 25% withdrawal penalty would be removed, meaning savers who don’t end up buying would get their own money back in full. The upper age limit would also go, addressing the longstanding criticism that the LISA excluded buyers who hadn’t opened an account before 40. The 25% bonus would remain, but it would be paid as a lump sum at the point of purchase rather than monthly.
The trade-off is that the retirement savings element disappears entirely. The new product is designed solely for first-time buyers.
If you already hold a LISA, your account continues under its current rules even after the new product launches. You won’t be automatically transferred, and the existing LISA will remain valid for qualifying purchases. The government’s consultation on the new First-Time Buyer ISA was launched in June 2026 and covers the detailed design of the replacement product.
The practical implication for you right now: if you’re eligible and planning to buy in the next few years, opening a LISA today still makes sense. The 12-month minimum holding period means the sooner you open one, the sooner you can use it. If the new product launches in April 2028 and you’re not yet ready to buy, you’ll likely be able to transition or open the new account at that point.
Understanding how a LISA fits into your conveyancing timeline is also worth thinking through early. Our guide to conveyancing for first-time buyers explains how and when funds are transferred at completion.
Key Takeaways
- A Lifetime ISA lets you save up to £4,000 per tax year, with the government adding a 25% bonus worth up to £1,000 annually.
- You must be aged 18 to 39 to open one, but you can use it to buy after your 40th birthday as long as it was opened in time.
- The property must cost no more than £450,000 and must be bought with a mortgage.
- The account must be open for at least 12 months before you can use the funds for a purchase.
- Two first-time buyers buying together can each use a LISA, doubling the bonus available.
- Withdrawing for a non-qualifying reason triggers a 25% penalty on the full amount, including the bonus, meaning you lose part of your own savings.
- The LISA is due to be replaced by a new First-Time Buyer ISA in April 2028, which will remove the withdrawal penalty and the upper age limit, but drop the retirement savings function.
- Existing LISA holders will keep their accounts under current rules when the new product launches.
- Only 17% of first-time buyers currently use a LISA, making it one of the most underused sources of government support available to buyers.
Frequently Asked Questions
The Help to Buy ISA closed to new applicants in November 2019, so you can no longer open one. If you already hold a Help to Buy ISA, you can transfer funds into a Lifetime ISA, but you cannot use both bonuses towards the same property purchase.
You can leave the money in the account and access it penalty-free from age 60 as retirement savings. If you withdraw earlier for a non-qualifying reason, a 25% penalty applies to the full withdrawal amount, meaning you lose the bonus and 6.25% of your own contributions.
It applies to the full purchase price of the property, not your individual share. If you’re buying a £500,000 home jointly, neither buyer can use their LISA without triggering the penalty, regardless of how the ownership is split.
Yes, in most cases. A LISA can be used alongside mortgage guarantee schemes provided the property meets the LISA’s eligibility rules. You can also hold a LISA alongside other ISA types in the same tax year, as the £4,000 limit sits within the £20,000 overall ISA allowance.
For most first-time buyers with a shorter savings horizon, a cash LISA is the lower-risk option because the value doesn’t fluctuate. A stocks and shares LISA can offer higher potential growth over several years but carries the risk of a market fall reducing your savings when you need them.