Complete guide to lifetime ISAs (LISAs)
Find out who can open a lifetime ISA, how the bonus works and how to avoid the penalty withdrawal charge.
Use our lifetime ISA calculator to find out how quickly you could build your house deposit with a OneFamily Lifetime ISA.
What is a lifetime ISA (LISA)?
Lifetime ISAs are a great way to build a deposit to buy your first home faster. That's because any money you pay into a lifetime ISA gets topped up by 25%, so if you pay in £100, you get another £25.
You also don't pay any tax on the money you withdraw.
You can choose to use a cash lifetime ISA (which grows by earning interest) or a stocks and shares lifetime ISA (which invests your money in the stock market on your behalf).
But lifetime ISAs should only be used to build a deposit for buying your first home or for life after 60. If you withdraw money for anything else, you'll be charged a penalty withdrawal fee.
Find out more about lifetime ISAs:
What are the lifetime ISA rules?
- You must be aged between 18 and 39 (inclusive) to open a lifetime ISA and you can keep paying money in until you turn 50
- You can pay up to £4,000 into a lifetime ISA each tax year (tax year runs April to April)
To avoid paying a penalty withdrawal fee:
- You must use the money in your lifetime ISA to buy your first home (unless you're over 60)
- You must have your lifetime ISA open, with money in it, for at least a year before taking money out
- The home you buy must cost no more than £450,000 and be the home that you live in
Find out more about the lifetime ISA rules and allowances:
How do I use a lifetime ISA to buy my first home?
Open your lifetime ISA and pay money in as you would with any savings account. The government bonus is added automatically.
Once you've had an offer accepted on a property, you'll need to let your conveyancing solicitor (conveyancer) know that you'd like to pay for your deposit in part or fully with a lifetime ISA. They will give you a form to fill in.
On completion day, your lifetime ISA provider will send the money in your lifetime ISA directly to your solicitor.
Find out more about buying your first home with a lifetime ISA:
Is buying a house right for me?
Before you even start saving for your house deposit, it's important to weigh up the pros and cons of renting and buying.
If you do decide to buy, you it's a good idea to consider where you want to live to get the most for your money without sacrificing the things that matter to you.
You might even choose to save for longer to build up a larger deposit, rather than trying to get on the property ladder as soon as possible.
Find out more about whether or not buying a first home is right for you:
What do I need to know about buying a house?
The process of buying a house is complicated, long and full of jargon. There's a lot to prepare for when buying a first home, such as finding a conveyancing solicitor and saving up some extra money for all kinds of fees.
To help you feel fully prepared to buy your first home, we've broken down everything you need to know.
Find out more about buying your first home:
Can you use a lifetime ISA to save for your retirement?
Yes! Once you turn 60, you can access the money in your lifetime ISA for anything you like without paying a withdrawal fee or any tax on the money you take out.
The UK government tops up everything you pay into a lifetime ISA by 25% and you can pay in up to £4,000 each tax year, meaning there's up to £1,000 of free money up for grabs every year! You can keep paying money in until you turn 50.
Some people use lifetime ISAs to save for something specific after they turn 60 - such as a big holiday or party - and others use it as an extra savings pot for retirement. Although lifetime ISAs are not an alternative to having a personal pension (they work differently), they can be useful as another pot of money put aside for retirement.
Find out more about saving for retirement with a lifetime ISA:
