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Lifetime ISA bonus for first-time buyers

Written by Ines Pena

With a lifetime ISA, you can get up to an extra £1,000 every tax year to help you buy your first home. But how is this bonus paid, and how can you get the maximum government bonus?

As you’ve no doubt heard, every time you pay into a lifetime ISA, the government does too. Let’s dig into how that bonus works.

What is the lifetime ISA government bonus?

When you pay money into a lifetime ISA the government tops up everything you put in by 25%. You can get the bonus on a cash lifetime ISA or a stocks and shares lifetime ISA.

The lifetime ISA bonus is based only on how much you save or invest, you don’t get a bonus on any interest or investment growth on your money.

Lifetime ISA maximum bonus

The maximum bonus on a lifetime ISA is £1,000 each tax year. This is because you’re limited to only paying up to £4,000 into a lifetime ISA each tax year. As the government bonus is 25% of everything you put in, if you max out the allowance then you’ll get the maximum bonus - £1,000.

When is the lifetime ISA bonus paid?

The bonus on your lifetime ISA will be paid every month, based on the previous month.

How much you get will depend on how much you paid in between the 6th of the month and the 5th of the following month, with your bonus being added to your account by the end of that month.

For example, if you pay £400 into your lifetime ISA between 6 February and 5 March, an extra £100 will be added to your lifetime ISA at the end of March.

You don’t need to do anything else to get this payment – just keep paying money in as you would with any savings account.

When do I stop getting the lifetime ISA bonus?

You’ll stop receiving your lifetime ISA bonus when you stop paying money in. This could because you have other financial commitments, have bought your first home or because you’ve turned 50.

At 50, you can’t pay into your lifetime ISA anymore, so you’ll stop receiving the 25% bonus.

Will my lifetime ISA bonus be paid before I buy a house?

Yes! You’ll get the bonus on your lifetime ISA a month after you’ve put money into your account, so you can use the bonus towards your deposit. This is different to help to buy ISAs, where the bonus is paid after you’ve bought your first home.

If you’ve made a payment into your lifetime ISA before the 5th of the month, you’ll get the 25% bonus on that money at the end of the same month. Any payments made into your account after this date will have the bonus applied the month after.

It’s important to keep these dates in mind if you’re planning to use your lifetime ISA to buy your first home and getting close to your completion date, so you can make sure you have your full lifetime ISA bonus on the day you need it.

Get boosted towards your first home

While the 25% government bonus on your lifetime ISA can put you on a fast-track to buying your first home, there are more tools at your disposal.

One of these is investing your money with the aim of it growing by more than inflation. If you’re looking to spend at least five years building up a deposit, you could consider a stocks and shares lifetime ISA which will invest your money in the stock market on your behalf.

Returns aren’t guaranteed, but a stocks and shares lifetime ISA has more potential to increase in value by more than inflation, than a cash lifetime ISA does (cash lifetime ISAs aren’t invested, they grow with interest rates).

As base interest rates begin to drop, interest rates being offered on lifetime ISAs could go down too. At the same time, house prices are continuing to rise, so investing your deposit savings could help them keep up with inflation. That way, when the time comes to get on the property ladder, your money has a better chance of having kept up with the price of your dream first home.

Our Lifetime ISA

With our stocks and shares Lifetime ISA you can invest up to £4,000 each tax year for a first home or retirement - and get 25% on top of everything you put in, up to an extra £1,000!

Explore our Lifetime ISA

Our lifetime ISA invests in stocks and shares. This means it has good potential to grow, but the value of your investments could go up as well as down, and you could get back less money than you’ve put in.