The Lifetime ISA (LISA) is one of the best savings deals available in the UK. Save up to £4,000 per year and the government adds a 25% bonus — that's up to £1,000 of free money annually. You can use it for your first home or retirement. If you're aged 18-39 and saving for a first home, it should be one of your first stops. The government has consulted on replacing the LISA with a new First Time Buyer ISA (the consultation closed in August 2026, with no launch date confirmed); for now, you can still open a LISA and pay in.
How the Lifetime ISA Works
Open a LISA and deposit up to £4,000 per tax year. The government adds 25% on top, paid monthly. That means:
- Save £4,000 → get £1,000 bonus = £5,000 total
- Save £2,000 → get £500 bonus = £2,500 total
- Save £200/month → get £50/month bonus
- Bonus is paid monthly between 4-6 weeks after your deposit
- Maximum lifetime bonus: £32,000 (saving from age 18 to 50)
Eligibility Rules
To open a LISA you must be aged 18-39 and a UK resident. You can keep contributing until age 50. Both cash and stocks & shares LISAs are available. For a first home, the property must cost £450,000 or less and you must have had the LISA open for at least 12 months.
- Must be 18-39 to open
- UK resident for tax purposes
- Property limit: £450,000
- 12-month minimum before using for a home purchase
- Can only be used for first home OR retirement (age 60+)
LISA vs Help to Buy ISA
The Help to Buy ISA closed to new applicants in 2019, but if you have one, you can keep contributing until November 2029. The LISA is superior in most cases: higher annual limit (£4,000 vs £2,400), higher property price cap (£450,000 vs £250,000 outside London), and the bonus is paid monthly rather than at completion.
The Withdrawal Penalty
If you withdraw for anything other than a first home or retirement, you'll pay a 25% penalty on the withdrawal amount. This effectively means you lose your bonus AND some of your own money. For example, if you have £5,000 (£4,000 yours + £1,000 bonus) and withdraw early, you get £3,750 — losing £250 of your own cash. Only put money in a LISA that you're committed to using for property or retirement.
Best LISA Providers in 2026
For a cash LISA, Moneybox and Nottingham Building Society offer competitive rates. For a stocks and shares LISA, AJ Bell and Hargreaves Lansdown are popular choices. If you're buying within 5 years, stick with cash. If retirement is your goal, stocks and shares will likely outperform over the long term.
FAQ
Can I have a LISA and a regular ISA?
Yes. Your LISA allowance (£4,000) sits within your overall £20,000 ISA allowance. So you could put £4,000 in a LISA and £16,000 in a regular ISA in the same tax year.
What if the house I want costs more than £450,000?
Unfortunately, you can't use LISA funds without penalty for properties over £450,000: you'd face the 25% withdrawal charge. A Help to Buy ISA won't help either, as its cap is lower (£250,000, or £450,000 in London). If you expect to buy above £450,000, a Cash ISA or regular savings account is usually the better home for your deposit.
Is a LISA worth it if I'm not buying a house?
Yes — it becomes an excellent retirement savings vehicle. The 25% bonus is guaranteed, which beats most investment returns. Think of it as a pension with more flexibility.
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