Lifetime ISA guide
Your complete guide to lifetime ISAs. Find out who can open a lifetime ISA, how the bonus works and how to avoid the penalty withdrawal charge.
Lifetime ISAs are a great way to build a deposit for 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 and 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 retirement. If you withdraw money for anything else, you'll be charged a penalty withdrawal fee.
Tip: 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)?
A lifetime ISA is a type of individual savings account (ISA) which comes with a government bonus to encourage you to save. They're designed to help you put money away for your first home or for life after 60.
You can pay up to £4,000 into a lifetime ISA each tax year and the government will top up everything you pay in by 25% - meaning there's up to £1,000 of free money up for grabs each year!
Find out more about lifetime ISAs:
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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:
Can you use a lifetime ISA to save for your first home?
Yes! Lifetime ISAs replaced help-to-buy ISAs in 2019.
Like help-to-buy ISAs, lifetime ISAs come with a 25% government bonus on everything you save. 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.
Just be careful to check the rules before you open a lifetime ISA: if you change your mind about buying a home and want to use the money for something else, the government will charge you a withdrawal fee.
Find out more about buying your first home with a lifetime ISA:
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.
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:
