Lifetime ISA: Bonus, Withdrawal Charge and Eligibility
A Lifetime ISA is a type of Individual Savings Account designed for buying your first home or saving for later life. If you are eligible, 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. You can withdraw without penalty to buy a first home costing £450,000 or less (if all rules are met), from 60, or in certain terminal illness cases. Other withdrawals usually face a 25% charge on the amount taken out.
How the bonus works
According to GOV.UK, you use a Lifetime ISA either to buy your first home or to save for later life. Each tax year you may pay in up to £4,000 until the age of 50. Your first payment must be before you turn 40.
The government adds a 25% bonus on what you pay in, capped at £1,000 per year. You can hold cash, stocks and shares, or a mix.
The £4,000 Lifetime ISA limit counts towards your annual ISA allowance. In the 2026 to 2027 tax year the overall ISA limit is £20,000. You can only pay into one Lifetime ISA in a tax year, though you may split the rest of your allowance across other ISA types.
At 50 you can no longer pay in or earn the bonus. Your account stays open.
Who can open one
You must be 18 or over but under 40 when you open a Lifetime ISA. You must be UK resident, unless you are a member of the armed forces or a Crown servant (or their spouse or civil partner) with special rules for non-UK residence.
You need a National Insurance number. Lifetime ISAs are offered by banks, building societies and other financial institutions that provide ISAs, alongside cash ISAs, stocks and shares ISAs and innovative finance ISAs described on GOV.UK.
Buying your first home
You can withdraw without the 25% charge to buy your first home if all of the following apply:
- The property costs £450,000 or less.
- You buy it at least 12 months after your first payment into the Lifetime ISA.
- A conveyancer or solicitor acts for you in the purchase, and your provider pays them directly from your Lifetime ISA.
- You buy with a mortgage. You cannot use your Lifetime ISA if you buy with a private mortgage from a relative, or from your spouse or civil partner.
If you buy with someone who also has a Lifetime ISA, both of you may use your savings and bonus if both are first-time buyers meeting every condition.
If you also have a Help to Buy ISA, GOV.UK states you can use the government bonus from only one of them for the first home purchase.
Buying a first home involves other costs beyond the deposit. In England and Northern Ireland, Stamp Duty Land Tax may be due on part of the price, depending on the value and whether you qualify for first-time buyer relief. Check GOV.UK for the rules that apply to your purchase.
Saving for later life
If you do not use the money for a first home, you can take your savings out from age 60 without the withdrawal charge. If you die, the Lifetime ISA ends and there is no withdrawal charge.
A Lifetime ISA is one way to build tax-efficient savings for retirement alongside workplace pensions. Your employer may enrol you in a workplace pension with separate contribution rules and tax relief.
The 25% withdrawal charge
Any withdrawal that is not for a qualifying first home, not from age 60 or over, and not because of terminal illness (less than 12 months to live) faces a 25% withdrawal charge. The charge applies to the whole amount withdrawn, including the bonus, and is designed to recover the government bonus.
GOV.UK’s first example: you save £800 and receive a £200 bonus, so you have £1,000. If you withdraw everything, the £250 charge leaves £750.
The second example shows the charge on a smaller withdrawal: to pay a £120 bill you must withdraw £160, because £40 is taken as the charge.
Transferring to another type of ISA before age 60 is treated like a withdrawal and can trigger the same 25% charge. Other savings on the savings hub, such as Premium Bonds, work differently and do not get the 25% government bonus.
Frequently asked questions
How much can I pay into a Lifetime ISA each year?
You can pay in up to £4,000 each tax year until you are 50. Your first payment must be before you turn 40. The £4,000 counts towards your overall ISA limit of £20,000 in the 2026 to 2027 tax year.
When can I withdraw without the 25% charge?
Without charge when buying your first home (if all conditions are met), from age 60 or over, or if you are terminally ill with less than 12 months to live.
What is the first-home price limit?
The property must cost £450,000 or less. You must buy at least 12 months after your first Lifetime ISA payment, use a mortgage, and have a conveyancer or solicitor; the provider pays them directly from your account.
What happens if I withdraw for another reason?
A 25% withdrawal charge applies to the whole amount taken out, including the bonus, which recovers the government bonus. GOV.UK gives the example of £800 saved plus £200 bonus: withdrawing all £1,000 leads to a £250 charge and £750 left.
Can two first-time buyers both use a Lifetime ISA?
Yes, if you buy together and you are both first-time buyers who meet all the conditions, you can each use your Lifetime ISA savings and bonus towards the purchase.
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Disclaimer: This article is general information and not personal financial, tax or legal advice. Check your own situation with HMRC, GOV.UK or a regulated adviser.