Lifetime ISA (LISA)
A government-bonused savings account for 18-39 year olds. Receive a 25% bonus on contributions up to £4,000 per year, for use towards a first home or retirement at 60.
By Omair SaoLast reviewed — rates for the 2026/27 tax year. See how we check our figures.
How It Works
You open a LISA and contribute up to £4,000 per tax year. The government adds a 25% bonus (up to £1,000). You can withdraw penalty-free to buy your first home (under £450,000) or after age 60. Any other withdrawal incurs a 25% penalty.
Tax Treatment
Contributions receive a 25% government bonus. Growth is tax-free. Qualifying withdrawals (first home or age 60+) are tax-free. Early withdrawals incur a 25% penalty.
Tax Advantages
- 25% government bonus on contributions
- All growth within the LISA is tax-free
- Qualifying withdrawals are completely tax-free
Who Is This Suitable For?
Adults aged 18-39 saving for their first home or building long-term retirement savings alongside a pension.
Worked Example: Five years of maximum LISA contributions
- 1Aged 25, you pay in £4,000 each tax year for five years — £20,000 of your own money.
- 2Each year the government adds 25%: £1,000, so £5,000 a year lands in the account.
- 3Used for a first home costing up to £450,000, the full £25,000 comes out with no charge.
- 4Withdrawn for any other reason before 60, the 25% charge on £25,000 is £6,250, leaving £18,750 — £1,250 less than you paid in.
Result: The bonus is generous when used as intended, but a change of plan costs more than just the bonus.
Illustrative figures using the 2026/27 rules on this page, last checked on 25 September 2026.
Advantages and Drawbacks
Advantages
- A £1,000 top-up on £4,000 is the best guaranteed return available to savers under 40.
- Cash and Stocks & Shares versions exist; a horizon to age 60 suits the investment version.
- You can keep paying in and receiving the bonus until you are 50, even after buying a home.
Drawbacks
- The £450,000 home price limit has not moved with house prices, which squeezes buyers in expensive areas.
- The 25% withdrawal charge claws back more than the bonus, so an unplanned withdrawal leaves you worse off than an ordinary savings account.
- The government has consulted on a First Time Buyer ISA to be offered in place of the LISA; existing accounts continue, but the product's future is unsettled.
- Every £4,000 paid in uses £4,000 of your overall £20,000 ISA allowance.
Notes for Limited Company Owners
For a director under 40, the LISA sits alongside pension contributions rather than replacing them: the company can pay into your pension, but LISA contributions must come from your own post-tax pocket. Because LISA money can be spent at 60 with no tax, it complements a pension whose withdrawals beyond the tax-free lump sum are taxable.
Common Mistakes
- Opening the account too close to a purchase — a LISA must have been open for a minimum period before its funds can buy a home.
- Assuming a partner who is not a first-time buyer can also use a bonus on the same purchase.
- Paying in after age 50, when contributions and bonuses are no longer allowed.
Who Should Avoid It
Anyone aged 40 or over cannot open one, and people who might need the money for anything other than a first home or retirement should use an ordinary ISA.
Official Sources
The rules on this page come from the following official pages and were checked on 25 September 2026. Read how we check our figures.
Related Calculators
Frequently Asked Questions
Can I use a LISA and a pension at the same time?
Yes. They serve different purposes and there is no restriction on holding both.
What is the early withdrawal penalty?
You lose 25% of the withdrawn amount, meaning you lose the bonus plus 6.25% of your own contributions.
Can I transfer a Help to Buy ISA to a LISA?
Yes. The transferred amount does not count towards your £4,000 annual LISA limit but does count towards the £20,000 ISA allowance.