A Lifetime ISA (LISA) is an ISA with a government bonus, for one of two goals: buying your first home, or saving for later life. The bonus is generous, but the rules on getting your money out are strict, so it’s worth knowing both before you open one.
Who can open one, and the bonus
You can open a Lifetime ISA if you're 18 or over but under 40, and pay in up to £4,000 a tax year until you're 50; the government adds a 25% bonus, up to £1,000 a year.- You must be 18 or over but under 40 to open one, and make your first payment before you're 40.
- You must be resident in the UK (or a Crown servant or member of the armed forces overseas, or their spouse or civil partner) to open and keep paying in.
- You can pay in up to £4,000 each tax year, and it counts towards your ISA allowance.
- The government adds a 25% bonus to what you pay in, up to £1,000 a year.
- From age 50 you can't pay in or earn the bonus, but the account stays open and keeps earning interest or investment returns.
- It can hold cash, stocks and shares, or both.
What the bonus is worth. Paying in the full £4,000 a year earns £1,000 of bonus. Someone who opens one at 18 and pays in the maximum every year until 50 could receive up to £32,000 in bonuses, before any interest or growth. See your own figures with the Lifetime ISA calculator.
Taking the money out
You can take money out of a Lifetime ISA without a charge to buy your first home, from age 60, or if you're terminally ill with less than 12 months to live; any other withdrawal, or a transfer to another type of ISA before 60, costs a 25% charge on the whole amount you take out, which takes back more than the bonus. How the charge works, with GOV.UK’s examples, is in withdrawing from a Lifetime ISA.
Using it for your first home
You can use a Lifetime ISA, bonus included, towards your first home if it costs £450,000 or less, you buy at least 12 months after your first payment in, a conveyancer or solicitor acts for you and you buy with a mortgage; any other withdrawal before 60 costs a 25% charge. The full conditions, and how the money is paid to your conveyancer, are in how to save for a house deposit.
Lifetime ISA or a normal ISA for a deposit?
For a first home within the price limit, the bonus usually makes a Lifetime ISA the better home for a deposit: £4,000 a year becomes £5,000 before interest, a return no cash ISA rate comes close to. A normal cash ISA is the better choice when:
- the home is likely to cost more than £450,000, or you won’t buy with a mortgage;
- you’ll buy within 12 months of first paying in;
- you might need the money for something else, since a withdrawal for another reason costs the charge;
- you’re saving more than £4,000 a year: the rest can go into a cash ISA alongside it.
You can use both: the Lifetime ISA up to its limit, and a cash ISA for the rest and for money you may need. If you already have a Help to Buy ISA (they’re closed to new savers), you can use only one of the two bonuses for your home: see Lifetime ISA or Help to Buy ISA.
Lifetime ISA or pension for later life?
Both give you a top-up from the government, but in different ways:
| Lifetime ISA | Pension | |
|---|---|---|
| Top-up | 25% bonus on up to £4,000 a year | Tax relief at your highest rate of Income Tax (20% added automatically in a relief-at-source pension) |
| Employer money | None | Often, in a workplace pension |
| Earliest access | Age 60 | Usually 55 (57 from 6 April 2028) |
| Tax when you take it out | None | 25% can usually be taken tax-free; the rest is taxed as income |
| Paying in | Only from age 18 to 50 | Up to your earnings, within the £60,000 annual allowance |
A 25% bonus is the same top-up as basic rate tax relief: £4 you pay becomes £5 either way. So the differences come down to the rest of the table:
- Employer contributions tip it towards the pension. If you’d lose your employer’s contribution by paying less into a workplace pension, the pension usually wins.
- Higher rate taxpayers get more relief on pension contributions than the Lifetime ISA bonus gives.
- The Lifetime ISA’s withdrawals are tax-free, while most of a pension withdrawal is taxed, so for a basic rate taxpayer with no employer money, a Lifetime ISA can come out ahead, as long as they won’t need the money before 60.
For the wider choice, see pension or ISA.
Related guides
- ISAs guide: the ISA types, the allowance and the main choices in one place
- Choosing a Lifetime ISA: cash or stocks and shares, and what to compare
- Lifetime ISA calculator: your bonus and balance by age
- How to save for a house deposit: the first-home rules in full