Home > Lifetime ISA > What is a Lifetime ISA?

What is a lifetime ISA?

Written by Frankie Entwistle

A lifetime ISA (LISA) is a type of saving or investment account that comes with a government bonus of up to £1,000 a year. LISAs are designed exclusively to help you save a mortgage deposit for your first home or build extra retirement income.

As with all ISAs, lifetime ISAs are tax-exempt. This means that no matter how much your investments grow by, you won't pay any tax on the money you withdraw.

You might have seen lifetime ISAs on TV programmes such as 'Location, Location, Location', where they're described as a 'first-time buyers scheme'.

what-is-a-lifetime-isa-500x500-1

How do lifetime ISAs work?

Once you've opened your lifetime ISA, you can pay in as you would with any saving or investment account - either with a direct debit or by manually transferring money in.

Lifetime ISA bonus

Every month that you pay in to your lifetime ISA, the government gives you a bonus. It pays 25% of everything you pay in, so the more you pay in, the more government bonus you get!

You can invest up to £4,000 in your lifetime ISA each tax year, so there's up to £1,000 of government bonus available each year.

Investment returns and interest

You can choose to open a stocks and share lifetime ISA or a cash lifetime ISA.

As well as the bonus, you'll get either interest (with a cash LISA) or, hopefully, investment returns (if you choose a stocks and shares LISA).

Tax and lifetime ISAs

Lifetime ISAs are tax-exempt, which means when it's time to withdraw your money you won't pay any Income Tax or Capital Gains Tax.

Withdrawing from a lifetime ISA

If you're withdrawing money to buy your first home, you need to instruct your conveyancing solicitor to use the money in your lifetime ISA towards your deposit. We'll then send them the money.

Once you turn 60, you can withdraw money from your lifetime ISA directly into your bank account.

    Lifetime ISA eligibility

    To open a lifetime ISA you must be:

    • a UK resident
    • aged between 18 and 39 (inclusive)

    Once opened, you can keep paying into your lifetime ISA until you turn 50.

    You can transfer a lifetime ISA that you hold with another provider to OneFamily. Find out about transferring your lifetime ISA.

    How does the lifetime ISA bonus work?

    Find out how you could get a £1,000 government bonus towards your first home or retirement with the OneFamily Stocks and Shares Lifetime ISA.

    Lifetime ISA rules and eligibility

    • You must be aged between 18 and 39 to open a lifetime ISA. You can pay money in until you turn 50.
    • The home you buy with your lifetime ISA must cost no more than £450,000, you must intend to live in it and you must buy it with a mortgage.
    • You can invest up to £4,000 in a lifetime ISA each tax year. But if you're paying into another type of ISA as well, be aware that the total amount you can pay into ISAs is £20,000 each tax year (tax year runs April to April).
    • If you take money out for anything other than buying your first home (through a conveyancing solicitor), the government will charge you 25% of everything you take out - which will be more than the bonus it paid in. But after you turn 60, you can take money out for anything you like without being charged.
    • Your lifetime ISA must be open, with money in it, for at least a year before you use it to buy your first home, otherwise you'll be charged the 25% government withdrawal charge.
    • You can transfer to a OneFamily Lifetime ISA from a cash ISA, stocks and shares ISA, or matured Child Trust Fund - so long as the value is £4,000 or less. The same applies to anyone under 40 with a Help to Buy ISA.

      How to use a lifetime ISA to buy your first home

      Pay money into your lifetime ISA as you would with any savings account. Then, when it's time to buy your first home, ask your conveyancing solicitor to use money from your lifetime ISA towards your deposit.

      There are few important points to consider:

      You need to have your lifetime ISA open, with money in it, for at least a year before you buy your first home
      The home you buy must be for you to live in - you can't rent it out as a buy-to-let
      The property you buy needs to be valued at £450,000, or less, and you'll need to be using a mortgage as well as your lifetime ISA
      The property must be in the UK

      Find out more about using your lifetime ISA to buy your first home.

      How to use a lifetime ISA to build extra retirement income

      After your 60th birthday you can withdraw money from your lifetime ISA, tax-free and without paying any withdrawal charges. Tax advantages depend on your individual circumstances and could change in the future.

      You can keep paying money into your lifetime ISA until you turn 50, but you will have to pay a government withdrawal charge if you take money out before you turn 60 (unless it's to buy your first home)

      Lifetime ISAs don't come with the same benefits as pensions. They can be a useful way to top up your savings for life after 60, but you might be better off using a pension as your main way to save for retirement

      If you're not sure whether a pension or a lifetime ISA is right for you, it might be worth speaking to an independent financial adviser

      Find out more about the differences between a pension and a lifetime ISA.

      Open a lifetime ISA with OneFamily

      Find out more about our Lifetime ISA, which invests in stocks and shares, and open your account here:

      Open a OneFamily Lifetime ISA

      Looking for more information on our Lifetime ISAs?

      Read our lifetime ISA FAQs or use our lifetime ISA calculator to see how your investments could grow over time.

      Woman sitting cross-legged on the floor drinking tea calmly