How the LISA works

The Lifetime ISA lets anyone aged 18–39 save up to £4,000 a year (which counts towards your overall £20,000 ISA allowance) and receive a 25% government bonus on top — up to £1,000 of free money a year. You can keep contributing and receiving the bonus up to age 50.

Using it for a first home

The LISA (plus its bonus) can be put towards a first home worth up to £450,000, provided the account has been open for at least 12 months before you use it. It can be combined with a partner's LISA if you're buying together, effectively doubling the potential bonus for a joint purchase.

The withdrawal penalty

Withdraw the money for any reason other than a qualifying first home purchase, reaching age 60, or a terminal illness diagnosis, and you'll pay a 25% government withdrawal charge on the amount taken out. Because the bonus is 25% of what you paid in but the penalty is 25% of the total (contributions plus bonus), withdrawing early can leave you with less than you originally paid in — a costly trap for anyone who might need the money for something else.

LISA vs Help to Buy ISA

The older Help to Buy ISA (closed to new applicants some years ago) worked similarly but with different limits and rules. If you still hold one, it's worth comparing its terms against a LISA rather than assuming they're interchangeable — existing Help to Buy ISA holders can typically keep saving into it or transfer to a LISA, but not usually hold new contributions in both for the same bonus.

Is it right for you?

A LISA suits first-time buyers confident they'll buy within the scheme's price cap and timeframe, or younger savers using it purely as a retirement account (accessible penalty-free from 60). It suits you less well if you might need the money sooner for something other than a first home, given the harsh withdrawal penalty.

Key takeaways

  • Save up to £4,000 a year and get a 25% government bonus, until age 50.
  • Usable towards a first home up to £450,000, or penalty-free from age 60.
  • Withdrawing for any other reason triggers a 25% charge that can leave you out of pocket.
  • Only open one if you're confident about the purpose and timeframe.