The Lifetime ISA Explained: £4,000 a Year, the 25% Bonus, and the Rules That Come With It
A Lifetime ISA lets you save up to £4,000 each year until you're 50, and the government adds a 25% bonus up to £1,000 per year (gov.uk). You must open it between 18 and 40, the £4,000 counts inside your £20,000 ISA allowance, and withdrawals outside the qualifying reasons carry a 25% charge.
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Open calculatorWhat a Lifetime ISA is
A Lifetime ISA is a savings account with a government top-up attached. You can put in up to £4,000 each year, until you're 50 (gov.uk). The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year (gov.uk).
It is not cash-only. You can hold cash or stocks and shares in your Lifetime ISA or have a combination of both (gov.uk).
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How it fits inside your ISA allowance
The Lifetime ISA does not sit outside the ordinary ISA system. The Lifetime ISA limit of £4,000 counts towards your annual ISA limit (gov.uk) — and this is £20,000 for the 2026 to 2027 tax year (gov.uk).
So a saver who fills the Lifetime ISA still has room elsewhere — the balance of the overall allowance can go into other ISA types.
Who can open one
The window is defined by two ages. You must be 18 or over but under 40 to open a Lifetime ISA (gov.uk). You must make your first payment into your ISA before you're 40 (gov.uk).
Using it for your first home
Two of the purchase conditions do the heavy lifting. The property must cost £450,000 or less (gov.uk), and you must buy the property at least 12 months after you make your first payment into the Lifetime ISA (gov.uk).
The second condition is the one that catches people: an account opened the month you start house-hunting is unlikely to qualify in time. Calculate Your Mortgage Payments →
Anyone still holding a Help to Buy ISA should note the interaction: if you have a Help to Buy ISA as well as a Lifetime ISA, you can only use the government bonus from one of them to buy your first home (gov.uk).
What happens at 50 and at 60
When you turn 50, you will not be able to pay into your Lifetime ISA or earn the 25% bonus (gov.uk). The account does not close — your account will stay open and your savings will still earn interest or investment returns (gov.uk).
Then the later-life door opens: you can take your savings out of a Lifetime ISA when you're 60 or over (gov.uk).
The 25% withdrawal charge
You can withdraw money from your ISA if you're: buying your first home, aged 60 or over, or terminally ill with less than 12 months to live (gov.uk).
Outside those, you'll pay a withdrawal charge of 25% if you withdraw cash or assets for any other reason — also known as making an unauthorised withdrawal (gov.uk).
HMRC's own worked example: assuming no growth, initial savings of £800 will earn a 25% government bonus of £200 and give you a pot of £1,000 (gov.uk). If you wish to withdraw the entire pot, a 25% charge will apply to the full £1,000 — you'll have to pay a government withdrawal charge of £250, and this will leave you with £750 (gov.uk). The saver put in £800 and walks away with £750 — the charge recovers more than the bonus.
Read our Lifetime ISA withdrawal penalty explainer →
A note on scope
This page covers the published rules on gov.uk: the £4,000 yearly limit (gov.uk), the 25% bonus capped at £1,000 per year (gov.uk), the 18-to-under-40 opening window (gov.uk), the £450,000 first-home ceiling (gov.uk), and the 25% withdrawal charge (gov.uk).
UK Calculator provides information and tools, not regulated financial advice. Whether a Lifetime ISA beats a pension contribution or another ISA for any individual depends on income, employer pension arrangements and housing plans — a regulated financial adviser is the right person to weigh those.
Frequently asked questions
How much can I pay into a Lifetime ISA?
You can put in up to £4,000 each year, until you're 50 (gov.uk).
How much is the government bonus?
The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year (gov.uk).
Does the Lifetime ISA have its own separate allowance?
No. The Lifetime ISA limit of £4,000 counts towards your annual ISA limit (gov.uk) — this is £20,000 for the 2026 to 2027 tax year (gov.uk).
Who can open a Lifetime ISA?
You must be 18 or over but under 40 to open a Lifetime ISA (gov.uk).
Can I use it for any house purchase?
For a first home, the property must cost £450,000 or less (gov.uk), and you must buy the property at least 12 months after you make your first payment into the Lifetime ISA (gov.uk).
What if I withdraw for another reason?
You'll pay a withdrawal charge of 25% if you withdraw cash or assets for any other reason (gov.uk).
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