Rules in this article were checked against GOV.UK in October 2026. The government plans to replace the Lifetime ISA with a new First Time Buyer ISA (see below). Check GOV.UK for the latest position.

A Lifetime ISA (LISA) is a government-backed account for saving towards a first home or for later life. The government adds a 25% bonus to what you pay in, up to £1,000 a year. There's a charge if you take money out for any other reason before age 60.

Key features

• Open from age 18 to 39

• Pay in up to £4,000 each tax year, until the day before your 50th birthday Government bonus of 25%, up to £1,000 a year (up to £32,000 in total if you open at 18 and pay the maximum every year)

• Cash or stocks and shares versions

• Withdrawals are bonus-inclusive and free of charge for a first home costing £450,000 or less, or from age 60

• Other withdrawals face a 25% charge

What you pay in counts towards your £20,000 annual ISA allowance.

Using a Lifetime ISA to buy a first home

To use your LISA without a charge for a home purchase, you must:

• be a first-time buyer

• buy a property costing £450,000 or less

• buy with a mortgage

• make your first payment into the LISA at least 12 months before you buy

• use a conveyancer or solicitor, who receives the money from your LISA provider

• buy a property in the UK that you’ll live in as your main home (not a buy-to-let or holiday home)

According to UK Finance figures for April to June 2026, first-time buyers in England put down an average deposit of 20.8% of the property's value, compared with 32.6% for home movers. Deposits vary by region, from an average of 16.2% for first-time buyers in Scotland to 27.3% in Greater London.

Using a Lifetime ISA for later life

From age 60, you can take money out tax-free for any reason.

The 25% withdrawal charge

If you take money out for any other reason, a 25% charge applies to the amount withdrawn, including the bonus. Because the charge is taken from your own money as well as the bonus, you get back less than you paid in.

There's no charge if you're terminally ill with less than 12 months to live, or if the account holder dies.

Stocks and shares Lifetime ISAs can fall in value as well as rise, so you could get back less than you put in.

What's changing: the First Time Buyer ISA

At the Autumn Budget 2025, the government said it would replace the Lifetime ISA with a new, simpler ISA for first-time buyers. HM Treasury consulted on the new First Time Buyer ISA between 23 June and 17 August 2026. Under the proposals:

• the bonus would be paid when you withdraw money to buy a home, and there would be no withdrawal charge

• the bonus rate and property price cap will be set at a future fiscal event

• no launch date has been set

The consultation says existing LISA holders "will be able to save into their LISA in line with the existing rules indefinitely". You won't be able to transfer a LISA into the new account, but you'll be able to use money from both towards the same purchase. Until the new account is available, new Lifetime ISAs can still be opened.

How many people use Lifetime ISAs?

According to HMRC, 99,750 account holders withdrew money from their Lifetime ISA to buy a first home in 2025 to 2026, about 13,050 more than the year before. The average withdrawal for a house purchase was £15,407.

Lifetime ISAs and pensions compared

The £60,000 annual allowance can be lower for some people, and unused allowance can sometimes be carried forward. See GOV.UK.

For every £100 you pay in from take-home pay:

Our calculation. A LISA bonus of 25% and basic-rate tax relief both turn £100 into £125. The pension example assumes “relief at source”, where your provider claims basic-rate relief and adds it to your pension. Some workplace pensions take contributions from your pay before tax instead, which works differently.

If you're employed, opting out of a workplace pension to pay into a LISA usually means giving up your employer's contributions. LISA savings can count as capital for means-tested benefits, such as Universal Credit, whereas pension savings may be treated differently. Saving into a LISA rather than a pension could affect your entitlement, so check the rules for the benefits concerned. A LISA and a personal pension both offer a government top-up, with different access and tax rules.

Lifetime ISA providers

Lifetime ISAs are offered by a number of banks, building societies and investment platforms, in cash and stocks and shares versions. Rates and fees vary and change often, so check each provider's own page.

How to open a Lifetime ISA

You can open a LISA online or through an app with a provider that offers them. You'll need to be a UK resident aged 18 to 39 and have a National Insurance number. You can only pay into one LISA in each tax year.

This article is for general information and isn't financial or tax advice. Tax treatment depends on your circumstances and may change. If you're unsure, you can get free guidance from MoneyHelper or advice from a regulated financial adviser.