Answers · UK 2025/26
How does a Lifetime ISA work for buying a first home?
A Lifetime ISA (LISA) lets you save up to £4,000 per year and receive a 25% government bonus (up to £1,000/year) on contributions. You can use your LISA to buy your first home worth up to £450,000. You must be aged 18--39 to open one and must have held the account for at least 12 months before purchasing.
Full answer
The Lifetime ISA (LISA) is one of the most generous savings incentives available to first-time buyers. The government adds 25p for every £1 you contribute -- effectively a 25% instant return on your savings. **Key rules** - Open between ages 18--39 - Contribute up to £4,000/year (counts towards your £20,000 ISA allowance) - Government bonus: 25% of contributions = up to £1,000/year - Bonus paid monthly by HMRC directly into the LISA - Can be a cash LISA or stocks and shares LISA **First home purchase conditions** To use your LISA penalty-free for property: 1. The property must cost £450,000 or less 2. You must be a first-time buyer (you have never owned a home, anywhere in the world) 3. You must have held the LISA for at least 12 months before exchange of contracts 4. The property must be bought with a mortgage (you cannot use LISA for a cash purchase) **Worked example -- maximum contributions** If you open a LISA at 18 and contribute the maximum every year until age 39 (22 years): - Total contributions: 22 x £4,000 = £88,000 - Total government bonus: 22 x £1,000 = £22,000 - Pre-growth total: £110,000 In practice, few people max out every year. A more realistic example: Contribute £300/month (£3,600/year) for 3 years: - Contributions: £10,800 - Bonus received: £2,700 - Total saved (before investment returns): £13,500 **Withdrawal penalty (non-qualifying)** If you withdraw for any purpose other than a qualifying first home purchase or retirement after 60, or terminal illness, you pay a 25% withdrawal charge on the total pot (contributions + bonus). This effectively costs you your bonus plus a small penalty on your own savings. Example: pot of £10,000 (including £2,000 bonus). Penalty: 25% x £10,000 = £2,500. You receive back £7,500 -- losing £500 of your own money. **LISA and Help to Buy** You cannot use a LISA and a Help to Buy ISA for the same property purchase (though Help to Buy ISAs are now closed to new applicants).
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.