Lifetime ISA Explained: Rules, Bonus, and Penalties
The Lifetime ISA (LISA) lets you save up to £4,000 per year (within your overall £20,000 ISA allowance) and receive a 25% government bonus — up to £1,000 free each year.
You can open a LISA if you are aged 18-39 and contribute until age 50. The money can be used for two purposes: buying your first home (up to £450,000) or retirement (withdrawable from age 60).
The catch: if you withdraw for any other reason, you pay a 25% withdrawal penalty. Because the penalty is applied to the total (including the bonus), you actually lose 6.25% of your own contributions. This makes the LISA unsuitable for general savings — only use it if you are confident you will buy a first home or leave it until 60.
Frequently Asked Questions
Can I use a Lifetime ISA and Help to Buy ISA?
You can hold both, but you can only use the government bonus from one of them towards the same property purchase.
What happens to my LISA at 50?
You can no longer contribute or receive the bonus, but the account stays open and continues to grow tax-free until you withdraw from age 60.
Can I transfer a LISA?
Yes, you can transfer between LISA providers. Transferring to a non-LISA ISA counts as a withdrawal and triggers the 25% penalty.
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