Lifetime ISA explained: bonus, rules and the new withdrawal charge

A Lifetime ISA adds a 25% government bonus to your savings for a first home or retirement. The rules are generous but strict, so know them before you start.

The basics

• Open between 18 and 39, pay in until you're 50
• Up to £4,000 a year, which counts towards your £20,000 ISA allowance
• 25% bonus, so £4,000 becomes £5,000
• Cash or stocks and shares versions are available

Using it for a home

It must be your first home, cost £450,000 or less, and be bought with a mortgage through a conveyancer. The account must have been open for at least 12 months. Couples can each use their own.

The withdrawal charge

If you withdraw for any other reason before 60, you pay a 25% charge. That takes back the bonus and a bit of your own money: put in £1,000, get a £250 bonus, withdraw £1,250, and you get back £937.50.

New from 29 October 2026: if you withdraw to buy a first home that costs more than £450,000, the charge is cut to 20%. You lose the bonus but get back all your own savings. The 25% charge still applies to other withdrawals.

What's coming in 2029

From April 2029, a new First-Time Buyer ISA replaces the Lifetime ISA for new savers. Existing Lifetime ISAs keep working, and you can still open one until then if you're 18 to 39. See our First-Time Buyer ISA guide.

Is it right for you?

It's a strong choice if you're under 40, haven't owned a home, and expect to buy within the £450,000 cap. It's less suitable if you might need the money for something else, or are buying in an expensive area.

General information, not financial advice.