Last updated: July 2026 · Sourced from official UK government publications
This is a plain-English definitions guide. All figures and rules are drawn from HMRC and gov.uk official sources. This is not financial advice, see the disclaimer below.
A Lifetime ISA (LISA) is a government-backed savings account that pays you a 25% bonus on everything you put in, up to £1,000 free money per year. You can open one if you are 18 or over and under 40. You can only use it to buy your first home or save for retirement, and there’s a penalty if you withdraw for anything else. Here’s who qualifies, and exactly how it works.
The age limit for opening a Lifetime ISA is 40. You must be 18 or over and under 40 on the day you open the account. Once it is open, you can keep paying in and earning the 25% government bonus until you turn 50. Those are the only two age caps that matter, and neither can be waived.
| Your age | What you can do |
|---|---|
| Under 18 | You cannot open a Lifetime ISA yet |
| 18 to 39 | You can open a LISA, pay in up to £4,000 a year and earn the 25% bonus |
| 40 to 49 | You cannot open a new LISA, but if you already have one you can keep paying in and keep earning the bonus |
| 50 and over | No more contributions and no more bonus. The account stays open and keeps earning interest or investment returns |
| 60 and over | You can withdraw the lot for any reason at all, with no charge |
The practical takeaway is that the 40th birthday is a hard door. If you are 39 and think you might want a LISA one day, opening one before that birthday keeps the option alive, because a LISA opened at 39 can still be paid into for another decade. The same logic applies to the 12-month rule in the LISA withdrawal rules: the account has to have been open for at least 12 months before you can use it towards a first home.
To open a Lifetime ISA you need to be 18 or over, under 40, and a UK resident. That is the entire test for opening one. You do not have to be a first-time buyer, you do not have to be employed, and there is no minimum income or minimum deposit set by HMRC.
Eligibility to use the money without a charge is a separate question, and this is where most people trip up. The two charge-free routes have their own conditions:
So you can be perfectly eligible to open a LISA and still not be eligible to use it for a house, for example if you once inherited a share of a property. Anything outside those three routes triggers the 25% withdrawal charge, which is explained in full further down.
The annual Lifetime ISA allowance is £4,000 in the 2026/27 tax year. That is the most you can pay in yourself between 6 April 2026 and 5 April 2027, and it earns a maximum government bonus of £1,000. The allowance did not change on 6 April 2026, and the government has said the £4,000 limit stays put until 5 April 2031.
Two things catch people out. First, the £4,000 is not a separate pot: it sits inside your overall £20,000 ISA allowance, so paying the full £4,000 into a LISA leaves £16,000 for everything else. That interaction is covered in more detail in how a LISA counts towards your £20,000 ISA allowance. Second, unused LISA allowance does not roll over. If you only manage a small amount this tax year, next year’s cap is still £4,000, and the part you did not use is simply gone. The full set of rules is in the guide to Lifetime ISA contribution limits.
The government adds 25% on top of every contribution you make to a Lifetime ISA, up to a maximum of £1,000 per tax year. Put in £4,000 and the government adds £1,000, giving you £5,000 in total. The bonus is paid automatically into your LISA by HMRC, usually within 6 to 8 weeks of each contribution.
The bonus is paid directly into your LISA, usually within 6 to 8 weeks of each contribution, and the mechanics are broken down further in the guide to how the LISA government bonus works. Here’s how the numbers stack up:
| You contribute | Government adds | Total in your LISA |
|---|---|---|
| £1,000 | £250 | £1,250 |
| £2,000 | £500 | £2,500 |
| £4,000 (max) | £1,000 (max) | £5,000 |
The maximum you can put in is £4,000 per tax year, earning a maximum bonus of £1,000. This counts towards your overall £20,000 annual ISA allowance. If you open a LISA at 18 and max it out every year until you turn 50, that adds up to somewhere between £32,000 and £33,000 in government bonuses alone. Which end you land on depends on where your birthday falls in the tax year, since contributions stop on your 50th birthday rather than at the end of that tax year.
Here is every rule that governs a Lifetime ISA, in the order you tend to hit them. The age rules control whether you can open one, the property rules control whether you can spend it on a house, and the age 60 rule is the backstop for everything else.
If you withdraw for any other reason before age 60 (except terminal illness), a 25% government withdrawal charge applies to the entire amount. Because this is charged on the total, not just your own contributions, you can end up with less than you originally saved.
Opening a LISA takes about ten minutes online. You apply directly with a LISA provider, not with HMRC. The biggest decision is whether you want a Cash LISA (interest, no investment risk) or a Stocks & Shares LISA (invests in funds, can grow more over time but can fall in value).
The main UK LISA providers as of 2026 are Moneybox, AJ Bell Dodl, Hargreaves Lansdown, Nutmeg, Beehive Money, Newcastle Building Society, Tembo, and Skipton (cash only). Rates and fees vary, so it pays to compare. MoneyHelper’s LISA guide keeps a current list.
To apply you typically need:
Once approved, you can pay in any amount up to £4,000 per tax year. Most providers let you set up a monthly direct debit, £333.33 per month maxes the cap exactly. The 25% bonus is added by HMRC monthly, with no action needed from you. For a step-by-step on the bonus timing, see when the government pays your LISA bonus.
Yes. The Lifetime ISA is still open to new applicants in the 2026/27 tax year, and HMRC is still paying the 25% government bonus on contributions. Nothing about the account changed on 6 April 2026: the annual limit is still £4,000, the maximum bonus is still £1,000, the property cap is still £450,000 and the early withdrawal charge is still 25%.
The 6 April 2026 tax year reset opened a fresh £4,000 LISA contribution allowance. If you have not opened one yet and you are 18 or over and under 40, the account is still available to apply for today.
One thing is worth knowing if you are weighing this up now. On 23 June 2026 the government published a consultation on a new First Time Buyer ISA, which it proposes offering in place of the Lifetime ISA. The consultation closes at 11:59pm on 18 August 2026. As proposed, the FTB ISA would pay its bonus at the point of purchase, would have no withdrawal charge, and would have no upper age limit. None of that is law yet: the bonus rate and limits are due to be announced at a future fiscal event, no start date has been set, the LISA can still be opened until the new product is available, and existing LISA holders can carry on saving under the current rules.
It depends which type you hold. A Cash LISA earns interest at a rate set by the provider, typically 3-5% AER as at 2025/26, paid monthly or annually into the account. A Stocks & Shares LISA does not pay interest, but the investments held inside it can grow through capital appreciation, dividends, and bond interest.
Either way, all returns are exempt from UK Income Tax, Dividend Tax, and Capital Gains Tax for as long as the money stays inside the LISA. The 25% government bonus is paid on top of whatever the underlying account earns. For a deeper breakdown of cash interest vs investment growth, see do you earn interest on a Lifetime ISA.
No, not while the money is inside the LISA, and not on qualifying withdrawals. Like other ISAs, the Lifetime ISA is a statutory tax wrapper: interest, dividends, and capital gains are exempt from HMRC tax. Withdrawals for a first home or after age 60 are also tax-free.
The only payment HMRC takes from a LISA is the 25% withdrawal charge, which applies if you take money out for anything other than a first home, terminal illness, or after reaching age 60. Strictly that is a charge, not a tax, but it has the same effect: 25% of the amount withdrawn is paid to HMRC. Because the charge is on the full balance (your contributions plus the bonus), an early withdrawal can leave you with less than you paid in. See LISA withdrawal rules for full details.
For a first home purchase under £450,000, a Lifetime ISA beats any regular savings account, no savings product offers a guaranteed 25% bonus on deposits. For any other savings goal, a regular savings account or cash ISA is better, because withdrawing from a LISA for an ineligible reason triggers a 25% penalty that can leave you with less than you put in.
For a first home purchase under £450,000: A LISA wins easily if you’re under 40. No savings account offers a guaranteed 25% on your deposits. Even if the LISA’s interest rate is slightly lower than the best instant-access account, the bonus far outweighs the difference.
For anything else: A regular savings account or cash ISA is better. The LISA is locked in, withdraw early for the wrong reason and you’ll pay that 25% penalty and potentially get back less than you put in.
| Lifetime ISA | Regular savings account | |
|---|---|---|
| Annual return on deposits | 25% government bonus (up to £1,000/yr) | Interest only, typically 4–5% in 2026 |
| Access to money | Restricted, first home or age 60 | Instant access (most accounts) |
| Early withdrawal penalty | 25% on total balance | None |
| Annual limit | £4,000 | Varies, typically £500–£3,600/yr for best rates |
| Best for | First home deposit or retirement (under 40) | Flexible savings, emergencies, any goal |
A pattern you’ll see a lot: an easy-access savings account running alongside the LISA rather than instead of it. The LISA money is ring-fenced for the purchase and carries the withdrawal charge; the easy-access pot has no charge and is there if life gets in the way. If you want the wider context on how ISAs fit together, start with how an ISA works. If you already hold an older first-time-buyer account, the LISA versus Help to Buy ISA comparison sets out which bonus does what.
You can open one if you are 18 or over, under 40, and a UK resident. That is the whole test. You do not need to be a first-time buyer to open a LISA, but you do need to be one to put the money towards a home without paying the 25% withdrawal charge.
£4,000 in the 2026/27 tax year, earning a maximum £1,000 government bonus. It sits inside the overall £20,000 ISA allowance rather than on top of it, and any part of it you do not use is gone at the end of the tax year.
The government adds 25% on top of every contribution you make to a Lifetime ISA, up to a maximum of £1,000 per tax year. Put in £4,000 and the government adds £1,000, giving you £5,000 in total. The bonus is paid directly into your LISA, usually within 6 to 8 weeks of each contribution, and it earns interest or investment returns alongside your own savings.
No. Several conditions apply: the property must cost £450,000 or less; you must be a first-time buyer who has never owned property anywhere in the world; you must be purchasing with a residential mortgage rather than buying outright with cash; and your LISA must have been open for at least 12 months before you use it for a purchase.
A 25% government withdrawal charge is applied to the total balance, your contributions plus the bonus. Because the charge is calculated on the total rather than just your own money, you can end up receiving less than you originally saved. For example, contributing £4,000 and receiving a £1,000 bonus (total £5,000) then withdrawing early results in a £1,250 charge, leaving £3,750. Penalty-free withdrawals are only available for a qualifying first home purchase, from age 60, or on terminal illness diagnosis.
Yes. The Lifetime ISA is a distinct ISA category and can be held alongside a cash ISA or a stocks and shares ISA. The £4,000 annual LISA limit counts toward the overall £20,000 ISA allowance, so it reduces how much you can contribute to other ISA types in the same year, but it does not stop you from holding those accounts alongside a LISA.
The age cap for opening one is 40: you must be 18 or over and under 40 on the day you open the account. The age cap for paying in is different and later. Once open, you can keep contributing and earning the government bonus until your 50th birthday. After 50 the account stays open and can keep growing, but no further contributions or bonuses are permitted.
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Subscribe free →Not financial advice. This guide explains how Lifetime ISAs work based on current HMRC rules as of July 2026. It is for information only and does not constitute personal financial advice. Individual circumstances vary, consider speaking to an independent financial adviser before making any savings decision. Always check gov.uk/lifetime-isa for the latest rules.