Lifetime ISA UK Guide: Bonus, Rules and Pitfalls
The Lifetime ISA offers free money on day one and a penalty that quietly leaves you with less than you put in. Both halves are true. Most savers only learn the second one too late.
LISA vs Help to Buy ISA vs S&S ISA
| Feature | Lifetime ISA | Help to Buy ISA | Stocks & Shares ISA |
|---|---|---|---|
| Bonus | 25% on up to £4,000/yr | 25% on up to £12,000 | None |
| Property cap | £450,000 UK-wide | £250k (£450k London) | No cap |
| Annual contribution | £4,000 | £2,400 | £20,000 |
| Non-qualifying withdrawal | 25% penalty (6.25% loss) | Lose bonus only | No penalty |
| Open to new accounts? | Yes (18-39) | Closed since Nov 2019 | Yes |
The LISA bonus is real. The withdrawal penalty leaves you with less than you put in.
Key takeaways
A Lifetime ISA lets you save up to £4,000 a year and gets you a 25% government bonus, worth up to £1,000 annually.
You can open one between ages 18 and 39, contribute until 50, and use it tax-free for a first home (up to £450,000) or from age 60 in retirement.
Withdraw for any other reason and you pay a 25% penalty, which actually leaves you worse off than your original contribution.
A LISA is the exception to the multi-ISA rule: you can only subscribe to one LISA per tax year, even after April 2024.