Lifetime ISAs (LISAs) explained

A lifetime ISA is a tax-free, long-term savings account geared towards helping people save for either a first home or retirement. You can save up to £4,000 each tax year in a Lifetime ISA and receive a 25% government top-up. This page explores the Lifetime ISA rules and how the bonus works, plus how Lifetime ISAs compare with other savings options.

The information provided here is for informational and educational purposes only and does not constitute financial advice. Please consult with a licensed financial adviser or professional before making any financial decisions. Your financial situation is unique, and the information provided may not be suitable for your specific circumstances. We are not liable for any financial decisions or actions you take based on this information.

If you have a Lifetime ISA, the government will grant you a 25% bonus on your contributions. Your LISA provider claims this bonus from HMRC, which is then added to your account. This bonus is treated as part of your savings and earns interest.

You can only contribute a maximum of £4,000 per tax year into your LISA account until you turn 50. Because of this contribution limit, the maximum you could receive as a government bonus is £1,000 per tax year.

You can hold cash or stocks and shares in your Lifetime ISA, or have a combination of both. Any contributions you make will count towards your overall annual allowance (£20,000 as of the 2026/27 tax year), which is a combined limit across all individual savings accounts you hold.

You can open a Lifetime ISA if:

• You’re between 18 and 39 years old
• The money in the account is yours
• You haven’t paid into another Lifetime ISA in the same tax year, and your contributions don’t exceed the annual £4,000 Lifetime ISA limit
• You’re resident in the UK. Alternatively, you are (or a spouse or civil partner is) a crown servant or member of the armed forces working overseas

Once the account is open, you must make your first payment before the age of 40. You can then continue to pay into your Lifetime ISA until you are 50 years old.

The government’s 25% top up doesn’t appear instantly after you deposit funds in your account. Your LISA provider has to claim the bonus from HMRC in regular cycles, known as claim periods, which typically run on a monthly basis.

Once your provider has made the claim, it can take anywhere between four and 10 weeks to be deposited in your Lifetime ISA. The exact timing depends on when you made the deposit.

Aside from the eligibility and contribution limits, a Lifetime ISA must be used for one of two things: to help you buy your first home or to save for retirement. As the name suggests, this account is designed for the long term.

If you plan to use the Lifetime ISA to buy a property, you must be a first-time buyer and your property must meet certain requirements. You also need to wait at least 12 months after making your first deposit before you can use your funds.

If you’re saving for retirement, you won’t be able to access your money until you turn 60. Taking money out earlier usually means a government withdrawal charge (though there are a few exceptions to this).

To use your Lifetime ISA to buy a property, there are a few criteria to meet.

• You must have never owned a property in the UK or overseas before. This includes owning a property (or a share of one) that you inherited, even if you never lived there.
• You should be buying a residential property that you intend to live in as your main residence.
• You’ll need to purchase the property with a mortgage – cash buyers or those with a buy-to-let mortgage aren’t eligible.
• The property should cost £450,000 or less, but purchases of land for a self-build would potentially be acceptable if other requirements are met.
• For first-time buyers, you can only make a withdrawal if at least 12 months have passed since you made your first payment into the Lifetime ISA.
• If you’re buying jointly with someone else and you’re both first‑time buyers, each of you can open a Lifetime ISA and use your own government bonus. However, the £450,000 property price limit still applies.

When the time comes to withdraw your funds to buy a property, you’ll need to sign a declaration confirming you meet the requirements. The money, including the government bonus, is then sent from your ISA provider to your conveyancer or solicitor to  put towards the purchase of your home.

A Lifetime ISA can be used as a tax-efficient way to save for retirement.

The rules state you must open a Lifetime ISA before the age of 40 and can contribute until you turn 50, although you won’t be able to access the funds until your 60th birthday. This means you’ll need to be prepared to wait at least 20 years before you can access your cash. However, once you turn 60, you can withdraw your funds (including the government bonus) tax-free and use the money as you wish.You don’t need to take all the cash out in one lump sum; you can leave some or all of the money invested if you prefer. 

Any unauthorised withdrawals will be subject to a 25% government charge. This includes withdrawing LISA savings before you reach the age of 60, unless it’s for buying your first home or you have a terminal illness. The 25% charge is applied to the total amount you withdraw.

Here, you can see some of the main differences between a Lifetime ISA and a typical workplace pension.

Whether a Lifetime ISA is right for you depends on your individual circumstances and your savings goals. If you’re unsure about the best option, speak to a financial adviser. Free pensions guidance is available through the government’s Pension Wise service.

As a longer-term savings vehicle with set rules, a Lifetime ISA won’t be suitable for every savings need. Some people may want the option to withdraw their savings sooner or take advantage of different interest rates.

For savers who are happy to lock their money away for an agreed period of time, fixed rate bonds offer a competitive interest rate that won’t change for the duration of the account. Withdrawals before the bond matures are not allowed, but savers can choose a term to suit them – typically from three months to five years.

Notice account holders can earn competitive variable interest with the option of withdrawing their money after a brief period of notice (often between 14 and 120 days). This type of account may appeal to someone who knows they’ll need to use their savings in the short- to medium-term, but won’t need instant access.

One of the most flexible options, easy access savings accounts let you withdraw your savings whenever you need. Interest rates are variable and sometimes lower than fixed rate bonds, but your money can be topped up and withdrawn without penalties.

Lifetime ISAs themselves can be stocks and shares LISAs. Instead of cash, you would invest your savings in assets such as shares and funds. This option has the potential for higher growth when the investment is left untouched for the long term, but it comes with greater risk. The value of your investments can go up or down, and you may get back less than you originally invested.

For those looking to the future, a pension is a common way to build retirement savings and can offer tax advantages on contributions depending on your circumstances. Your employer may also contribute to grow your pension pot further.

First-time buyers have other schemes open to them. While closed to new applicants, existing holders of Help to Buy ISAs can still save into them until 30th November 2029. Alternatively, shared ownership lets you purchase a portion of a property and pay rent on the rest.

Although we don’t currently offer Lifetime ISAs at Raisin UK, you can compare a range of other types of savings accounts from our partner banks and building societies through our marketplace. Simply register for a free Raisin UK Account, log in, apply for your chosen savings account, and transfer your deposit.