What is the Lifetime ISA?
A Lifetime ISA gives a 25% government bonus on contributions up to £4,000 a year — a free £1,000 annually. It can be used for a first home up to £450,000 or accessed from age 60 for retirement.
The catch: withdrawing for any other reason incurs a 25% penalty, which on the maths actually costs you more than the bonus gave — roughly 6.25% of your own contribution.
Formula & worked example
Balance = (Balance + contribution + bonus) × (1 + return)
Worked example: £4,000 a year from age 27 to 35 at 5%, starting from £5,000 → about £57,500. You paid in £32,000 over those years and the government added £8,000 in bonuses — free money that alone covers a meaningful part of a deposit.
How to use this lifetime isa calculator
- Enter your annual contribution, capped at £4,000 for bonus purposes.
- You can only open a LISA between ages 18 and 39, and contribute until 50.
- Use a low return for a Cash LISA, or 5–7% for a Stocks & Shares LISA.
- The account must be open 12 months before a first-home purchase.
Smart tips
- The £4,000 LISA contribution counts towards your overall £20,000 ISA allowance.
- Open one before your 40th birthday even with £1 — you can then contribute until 50.
- The £450,000 property cap has not risen with house prices, which is a real constraint in London.
- The 25% withdrawal penalty exceeds the 25% bonus in effect, costing about 6.25% of your own money.
- For retirement, a workplace pension with employer matching usually beats a LISA; the LISA shines for first-home saving.
Frequently asked questions
How much is the LISA bonus?
25% on contributions up to £4,000 a year — a maximum of £1,000 annually, paid monthly by the government.
What can I use a Lifetime ISA for?
A first home costing up to £450,000, or retirement from age 60. Any other withdrawal incurs a 25% penalty.
Is the LISA penalty really 25%?
Yes, and because it applies to the whole withdrawal including the bonus, you lose about 6.25% of your own contribution on top of the bonus.
LISA or pension for retirement?
A workplace pension usually wins because of employer matching and tax relief. The LISA is strongest for first-time buyers.
Want the theory behind the numbers? Read our UK investing guides on the Money Blog.
Written by Gurjeet Singh, Sharpen Solutions. Last reviewed 15 Oct 2026. Sources: GOV.UK — Lifetime ISA: £4,000 limit and the 25% bonus, GOV.UK — Individual Savings Accounts: the annual allowance. How we check these numbers.