Lifetime ISAs (LISAs)

What is a Lifetime ISA?

Lifetime ISAs (LISAs) are a combined savings product both for First Time Buyers to save their deposit and for anybody to save for retirement.

You can save up to £4,000 in a LISA per year. The government will give you a 25% bonus on any contributions, for example:

  • Put £2,000 into the LISA and get a £500 bonus
  • Put the full £4,000 get an extra £1,000

ℹ️ The bonus is paid within two months of your contributions.

LISAs can be either cash (getting paid interest by a bank or building society) or Stocks & Shares (where you aim to make returns on your chosen investments). Both will receive the government bonus.

Like all ISAs the money within it is sheltered from income and capital gains tax. As LISAs are their own type of ISA, you can pay in to a LISA in addition to any of the other types of ISA in the same tax year, but they come within the overall annual contribution limit of £20,000. More info on ISAs.

When can I access the money?

You can access your LISA savings (including bonus) when buying a house as a first time buyer. You can also withdraw the funds completely penalty-free from the age of 60.

You can withdraw money from your LISA at any time. However, if it is not for one of the two reasons listed above, the withdrawal will be subject to a 25% penalty.
ℹ️ Note this has been temporarily reduced to a 20% penalty in the 2020/2021 tax year as a result of the COVID-19 pandemic. The reduced penalty equates to just the Government bonus and any growth on that portion being removed.

Using a LISA to buy your first home

Your LISA needs to be open for a year before you can use the money. You must be a first time buyer (as per the Help-To-Buy eligibility rules). The house must be in the UK and cannot be worth more than £450,000. You’re not meant to let out a house that was bought using a LISA. It does not need to be a new build.

If you are buying together with a partner and are both first time buyers, then you can both use LISAs (double bonus!). Equally if only one of you is a first time buyer, that person can still put money from their LISA towards the purchase.

⚠️ Do not withdraw funds yourself!
Your conveyancer will need to arrange the use of your LISA to ensure you get the bonus – the funds will be paid directly to them.

Using a LISA to save for retirement

The idea of a 25% ‘bonus’ can get people more excited to save for retirement than the idea of a ‘pension’ – but in fact, pensions offer the same (or better) top-up to your contributions, and have several other advantages over a LISA.

In most cases pensions are better value and should be the first place you save for retirement, but in a few specific situations a LISA is worthwhile. Only once you have exhausted tax relief, maxed out employer and/or reached the annual allowance for pension contributions does a LISA potentially become better than a pension, but with additional drawbacks in disaster scenarios.

A full comparison can be found at: ISA vs LISA vs pension.

Should I get a Cash or S&S LISA?

If you are saving for a deposit, this will depend on your timescale and risk tolerance. See our flowchart for more help on this, but in summary, if you intend to purchase a house within the next five years a Cash LISA is most likely to be suitable. If it’s likely to be further in the future you can consider a S&S LISA.

Savings for retirement within a LISA should be invested in stocks and shares, just like your pension is, in order that they can grow to support you in retirement. Cash savings currently struggle to keep up with inflation and almost certainly won’t grow enough to keep you flush in retirement.

For more help learning about investing, see our page Investing 101.

Who is offering LISAs?

For Cash ISAs, Money Saving Expert maintain a Best Buys list.

A few brokers offering S&S LISAs are Hargreaves Lansdown, Nutmeg, The Share Centre, and AJ Bell. Fees eat into your gains so it’s important to choose the cheapest provider for your specific situation.

Who can open one?

Anyone aged 18 and 39 (the cut off is the day before your 40th birthday) who is resident in the UK. You cannot pay in to a LISA once you turn 50 (again the cut off is the day before your 50th birthday).

Help to Buy (H2B) ISA – no longer available to new savers

ℹ️ The Help to Buy ISA was replaced by the Lifetime ISA (LISA).
This section has been kept as a reference for those still holding them.

They’re a little bit different from LISAs in the following ways:

  • The H2B ISA counts as a Cash ISA, and unless your H2B provider offers a “split account”, you can’t subscribe to a Cash ISA in the same year you pay into a H2B ISA. LISAs are their own type.
  • You can take the money out whenever you want, but won’t receive the bonus. Unlike LISA, there is no additional penalty.
  • The value of the property is capped at £250,000 outside London and £450,000 inside London.
  • The maximum initial contribution was £1,200 (topped up to £1,500 if rules are met), and must have been made within 28 days of opening.
  • The maximum monthly contribution is £200 (topped up to £250 if rules are met.
  • The maximum government top-up is £3,000 (So total value £15,000 + interest, with £12,000 of contributions).
  • You can transfer a H2B ISA to a LISA and keep the bonus.
  • You will stop being able to contribute to a H2B ISA in November 2029.

How do HTB ISAs and LISAs interact?

You are only able to claim the bonus on one or the other in any given tax-year. You can only use one during a house purchase.

As HTB ISAs are no longer available, this has become somewhat of a legacy issue. If you have a H2B ISA, you can transfer it into a LISA and keep the bonus.