Who can open one — and the age rules that trip people up
A Lifetime ISA is a savings or investment account designed for two things only: buying your first home, or saving for later life. You can hold it as cash, as stocks and shares, or a mix of both.
- You must be 18 or over but under 40 to open one — and you have to make your first payment before you turn 40. Miss that window and you can never open a LISA.
- You can keep paying in and earning the bonus until you’re 50. After 50 the account stays open and keeps earning interest or investment returns, but no new payments and no more bonus.
- You must be UK resident (or a crown servant, a member of the armed forces serving overseas, or their spouse or civil partner).
Free government money — genuinely
The 25% bonus is one of the most generous top-ups the UK government offers. On the full £4,000 a year, that’s an extra £1,000 every year added straight to your savings. Over the years until you buy a first home or reach 60, that can add up to tens of thousands of pounds of bonus you never had to earn.
How the 25% bonus works
Pay in money, the government adds 25% on top. The numbers are simple, but two limits matter:
| What | The rule |
|---|
| Maximum you can pay in | £4,000 per tax year |
| Government bonus | 25% of what you pay in — so up to £1,000 a year |
| When it’s paid | Monthly, on what you paid in that month |
| Counts towards your ISA allowance | Yes — the £4,000 sits inside your £20,000 total ISA allowance (2025/26) |
| You can pay in until | Age 50 |
So if you pay in £4,000, you end the year with £5,000 plus any interest or investment growth. Pay in £2,000 and you get a £500 bonus. There’s no need to hit the full £4,000 to benefit — every pound you save earns its 25%.
The £20,000 ISA allowance
The £4,000 LISA limit is part of your overall £20,000 annual ISA allowance — not on top of it. If you put £4,000 into a LISA, you have £16,000 of allowance left for other ISAs that year.
Using it for a first home
This is what most people open a LISA for. You can put the whole pot — your savings plus the bonus — towards a first home if all of these apply:
- The property costs £450,000 or less (the same cap everywhere in the UK).
- You buy it at least 12 months after your first payment into the LISA.
- You’re buying with a mortgage, and you use a conveyancer or solicitor — your provider pays the money straight to them.
- You’re a first-time buyer (you’ve never owned a home anywhere in the world).
Buying with another first-time buyer who also has a LISA? You can both use your savings and both bonuses on the same property. You can’t use it for a buy-to-let, a holiday home, or a private mortgage from a close relative or your partner.
First home or retirement — pick the door before you commit
A LISA serves two jobs from one pot. For a home, the money is reachable penalty-free as soon as you complete (after the 12-month minimum). For later life, you leave it untouched until age 60, then take it tax-free. Both are charge-free — it’s every other way of taking the money out that costs you.
The 25% charge — the trap that takes back more than the bonus
You can withdraw with no charge only if you’re: buying your first home (as above), aged 60 or over, or terminally ill with less than 12 months to live. For any other reason, there’s a 25% withdrawal charge — and here’s the part that catches people out.
The 25% bonus was added to your savings. The 25% charge is taken off the total (your savings plus the bonus). Because the charge is a quarter of a bigger number, you lose more than the bonus you were given — you end up with less than you put in. GOV.UK’s own worked example:
| Step | Amount |
|---|
| You pay in | £800 |
| Government adds 25% bonus | +£200 → pot of £1,000 |
| You withdraw the lot for another reason | 25% charge on £1,000 = −£250 |
| You’re left with | £750 — £50 less than you put in |
Don’t put money you might need soon into a LISA
A Lifetime ISA is for a first home or retirement — full stop. If there’s any chance you’ll need the money for something else, an emergency, a car, a non-qualifying house (over £450,000), the 25% charge means you get back less than you saved. Treat it as locked away. And note: if you only need part of the money, you have to withdraw more than you need to cover the charge — GOV.UK’s example: to get £120 in cash you withdraw £160 and pay a £40 charge.
Do this now
Saving for a first home? If you’re under 40 and might buy within a few years, opening a LISA today starts the 12-month clock and starts the 25% bonus on your very first payment — even a small one. Compare cash vs stocks-and-shares providers before you commit.
Not sure a LISA is right for your situation, or weighing it against a pension or a regular savings account? Get free, impartial guidance from MoneyHelper — the government-backed money guidance service — before you lock money away.
Already have a Help to Buy ISA?
Help to Buy ISAs are closed to new applicants, but plenty of people still hold one. Two rules matter if you have both:
- Towards a first home, you can only use the government bonus from one of them — the LISA or the Help to Buy ISA, not both.
- You can transfer a Help to Buy ISA into a Lifetime ISA. But transferring the other way — LISA into a Help to Buy ISA — triggers the 25% withdrawal charge.
The Help to Buy ISA has no £450,000 price cap outside London but a smaller maximum bonus; the LISA has the bigger bonus and the wider use (it also funds retirement). Which suits you depends on where and when you’re buying — a good question for MoneyHelper.