UK Lifetime ISA (LISA) 2026/27: £4,000 Cap + 25% Bonus Deep-Dive
UK Lifetime ISA 2026/27: £4,000 a year, 25% bonus, first home up to £450,000 or age 60, the 25% charge, LISA vs pension and worked examples.
2026/27 LISA at a glance
Annual limit
£4,000
Within the £20,000 Individual Savings Account (ISA) allowance
Government bonus
£1,000/yr
25% of what you pay in
Age rules
18+
First payment before 40; pay in until 50
House price cap
£450,000
First home, bought with a mortgage
Rules per GOV.UK - Lifetime ISA. HM Treasury consulted from June to August 2026 on a new First Time Buyer ISA that, once available, "will be offered in place of the Lifetime ISA"; until then Lifetime ISAs can still be opened and holders can keep saving under the existing rules (consultation).
4 worked LISA scenarios
| Scenario | You pay in | Bonus | Pot | You receive | Charge |
|---|---|---|---|---|---|
| First home after 5 years of maximum payments Assumed 4% a year. Charge-free if the home costs £450,000 or less, is bought with a mortgage and you live in it. | £20,000 | £5,000 | £27,082 | £27,082 | none |
| Retirement: first payment at 18, paying in until 50 Assumed 5% a year, then left invested from 50 to 60. | £128,000 | £32,000 | £613,269 | £613,269 | none |
| Unauthorised withdrawal after 3 years Assumed 4% a year; the 25% charge applies to the whole amount withdrawn. | £12,000 | £3,000 | £15,608 | £11,706 | -£3,902 |
| Late starter: first payment at 39, paying in until 50 Assumed 5% a year, then left invested from 50 to 60. | £44,000 | £11,000 | £115,707 | £115,707 | none |
Arithmetic illustrations: the full £4,000 paid in at the end of each year with the £1,000 bonus added, at the assumed growth rate shown. They are not forecasts; investments can fall, and inflation reduces what the pot buys.
The 25% charge: why it is a 6.25% loss of your own money
The charge is taken from the whole amount withdrawn, which already includes the bonus. So it recovers the bonus and a further 6.25% of what you paid in.
Worked example: pay in £100; the government adds £25; the account holds £125. An unauthorised withdrawal of the lot costs 25% × £125 = £31.25, so you receive £93.75, which is 6.25% less than the £100 you paid in. If you only need part of the money, you must withdraw more than you need to cover the charge: GOV.UK's example is withdrawing £160 to receive £120.
LISA vs pension for retirement
| Saver | Lifetime ISA | Pension | What tends to decide it |
|---|---|---|---|
| Basic-rate (20%) | 25% bonus, equal to 20% relief; tax-free from 60 | 20% relief; 25% normally tax-free, rest taxed | Tax on the way out, employer contributions, access age |
| Higher-rate (40%) | 25% bonus only | 40% relief | Larger relief on pension contributions |
| Additional-rate (45%) | 25% bonus only | 45% relief | Larger relief on pension contributions |
| Access before pension age | First home, or 25% charge | Not until minimum pension age (55; 57 from 6 April 2028) | How likely you are to need the money early |
| Limits | £4,000 a year, within the £20,000 ISA allowance | Relief up to relevant earnings, within the £60,000 annual allowance | Many people use both |
Related guides
Frequently asked questions
What is a Lifetime ISA (LISA)?
A Lifetime ISA helps you save for a first home or for later life. You can pay in up to £4,000 a year until you are 50, and the government adds a 25% bonus, up to £1,000 a year (paid under the Savings (Government Contributions) Act 2017). You must be 18 or over to open one and make your first payment before you are 40. The £4,000 counts towards your £20,000 ISA allowance. It can hold cash, stocks and shares, or both. Charge-free withdrawals are for a first home costing £450,000 or less, from age 60, or if you are terminally ill; any other withdrawal carries a 25% charge.
How does the 25% government bonus work?
For every £1 you pay in, the government adds 25p, up to £1,000 a tax year on the £4,000 maximum. The bonus is added to your account and is paid on what you pay in, not on growth. From 18 to 50 there are about 32 years of payments, so the most bonus anyone can receive is around £32,000. If you die, the Lifetime ISA ends and there is no charge to withdraw the funds; a surviving spouse or civil partner can get an additional permitted subscription allowance equal to the account's value.
When can I withdraw without penalty?
(1) First home: the property costs £450,000 or less, is in the UK, you buy it at least 12 months after your first payment into the Lifetime ISA, you use a conveyancer (the money is paid to them, not you), you buy with a mortgage (not a buy-to-let mortgage), and you will live in it as your only or main home. Since 6 April 2024 the mortgage cannot be from a connected person such as a relative. (2) Age 60 or over: withdraw any amount. (3) Terminal illness with less than 12 months to live. Any other withdrawal carries a 25% charge on the amount withdrawn. Example from GOV.UK: £800 saved plus a £200 bonus is £1,000; withdrawing it all costs £250, leaving £750.
Is the 25% penalty really only a 6.25% loss?
Yes, of your own money, because the charge is taken from a pot that already includes the bonus. Pay in £100, the bonus adds £25, the pot is £125. A 25% charge on £125 is £31.25, so you get £93.75 back: 6.25% less than you paid in. So the charge recovers the bonus and a further 6.25%. An ordinary ISA has no such charge, so a Lifetime ISA only suits money you are confident will go to a first home or stay until 60.
LISA vs Self-Invested Personal Pension (SIPP) - which for retirement saving?
Lifetime ISA: you pay in from taxed income, the 25% bonus is equivalent to 20% basic-rate relief (£80 becomes £100), and withdrawals from 60 are tax-free. Pension: relief at your marginal rate, within your relevant earnings and the £60,000 annual allowance; access from the normal minimum pension age (55, rising to 57 from 6 April 2028); up to 25% normally tax-free and the rest taxed as income. Basic-rate taxpayers: the relief is the same going in, so the difference is tax on the way out and the pension's earlier access. Higher-rate (40%) and additional-rate (45%) taxpayers: pension relief is larger; £100 in a pension can cost £60 or £55 of net income. Employer pension contributions, which a Lifetime ISA cannot receive, can also tip the balance. Many people use both.
Cash LISA vs Stocks & Shares LISA - which is better?
A Lifetime ISA can hold cash, stocks and shares, or a mix. Cash suits money you expect to use for a home soon, because the balance does not fall; cash held with a UK-authorised bank or building society is protected by the FSCS up to £120,000 per person per institution. Stocks and shares can rise or fall and suit a longer horizon such as saving to 60. You can move a Lifetime ISA to another Lifetime ISA provider by transfer without losing the bonus. Moving a Lifetime ISA into another type of ISA before 60 carries the 25% charge. Compare current rates and charges on providers' own published terms.
LISA vs Help to Buy ISA?
Help to Buy ISAs closed to new accounts on 30 November 2019, and payments into existing accounts stop in November 2029. They paid a 25% bonus up to £3,000 on £12,000 of savings, had a price cap of £450,000 in London and £250,000 elsewhere, and paid the bonus at completion. You can hold both, but you can only use the bonus from one of them for your first home. You can transfer money from a Help to Buy ISA into a Lifetime ISA; moving money the other way triggers the 25% charge.
What is the 12-month rule for a first-home withdrawal?
You must make the first-home withdrawal at least 12 months after you made your first payment into the Lifetime ISA. The clock runs from the first payment, not from opening the account, so if you might buy in the next few years it makes sense to make a first payment early. The withdrawal is paid to your conveyancer. The purchase must be expected to complete within 90 days of the withdrawal; if it does not, the conveyancer returns the money to your Lifetime ISA.
Can I open multiple LISAs?
You can hold more than one Lifetime ISA, but you can only pay into one in each tax year, and the £4,000 limit applies to that year in total. Move between providers with the new provider's transfer form rather than withdrawing yourself, which would trigger the charge. Couples each have their own £4,000 limit and bonus, and two first-time buyers can both use their Lifetime ISAs on the same home.
What if I am 40 and have never paid into a LISA?
You can no longer start one: the first payment must be made before 40. If you already have one, you can keep paying in until 50; after that the account stays open and keeps earning interest or returns. Alternatives without an age limit are an ordinary ISA (no bonus, no withdrawal charge) and a pension (relief at your marginal rate, but locked until minimum pension age). A partner who is under 40 can open their own Lifetime ISA; money you give them to pay in is a gift.
Can I use a LISA for buy-to-let or a second home?
No. A charge-free withdrawal needs a first residential purchase that you will occupy as your only or main home, bought with a mortgage that is not a buy-to-let mortgage. Funds used for a property you will let or use as a holiday home carry the withdrawal charge. You can buy jointly with someone who is not a first-time buyer, but you must be a first-time buyer yourself. After the purchase the account can stay open; money left in it can be withdrawn charge-free from 60.
How does the LISA interact with the main ISA allowance?
Lifetime ISA payments count towards your £20,000 ISA allowance. For example, £4,000 into a Lifetime ISA leaves £16,000 for cash, stocks and shares or innovative finance ISAs that tax year. The government bonus does not count towards the allowance. A child's Junior ISA has its own separate limit.