Last reviewed: June 2026
TL;DR- The Lifetime ISA (LISA) provides a 25% government bonus on contributions up to £4,000 per year, giving a maximum annual bonus of £1,000.
- LISA funds can be used to purchase a first home with a purchase price of up to £450,000 - this cap has not risen since the LISA launched in 2017.
- The LISA must be open for at least 12 months before the funds can be used for a property purchase.
- Withdrawals for purposes other than first home purchase or retirement before age 60 incur a 25% penalty charge, which reduces the fund below the amount the saver originally contributed.
What Is the Lifetime ISA?
The Lifetime ISA (LISA) is a government savings scheme introduced in April 2017, available to adults aged 18-39. It allows savers to contribute up to £4,000 per year and receive a 25% government bonus on contributions - up to £1,000 per year in bonus payments. Funds accumulate tax-free within the LISA wrapper, in the same way as other ISA types.
The LISA is designed for two purposes: purchasing a first home, or saving for retirement. For home purchase purposes, the funds (including the bonus) can be used as part of the deposit on a first residential property. The account must be held with a LISA provider - banks, building societies and investment platforms can offer LISAs, though not all financial institutions offer the product.
Using a LISA for a First Home Purchase
To use LISA funds for a property purchase, the following conditions must all be met:
- The account must have been open for at least 12 months before the withdrawal.
- The property must cost no more than £450,000.
- The buyer must be a first time buyer who has never previously owned a residential property.
- The property must be purchased with a mortgage - cash purchases do not qualify for LISA withdrawal for property purchase.
- The LISA must be closed as part of the withdrawal process for property purchase.
The withdrawal is made by the LISA provider directly to the conveyancer on completion. The buyer cannot access the funds directly and then purchase - the process must go through the formal LISA property purchase withdrawal route managed by the provider and HMRC.
The £450,000 Property Price Cap
The £450,000 maximum property price for LISA use was set when the scheme launched in 2017 and has not been updated since. Property prices in many parts of the UK - particularly London and the South East - have risen significantly in the intervening period, meaning the LISA is less useful as a deposit tool for buyers in higher-priced markets. A first time buyer with a LISA targeting a property above £450,000 cannot use the LISA for the purchase and faces a penalty if they withdraw the funds for any other purpose before age 60.
Various stakeholders have called for the £450,000 cap to be raised to reflect property price inflation, but no change had been confirmed as of the date of this article. Buyers who may purchase above this threshold should consider this risk before committing savings to a LISA.
The Withdrawal Penalty
Withdrawing LISA funds for any purpose other than a qualifying first home purchase or retirement after age 60 (or on terminal illness diagnosis) incurs a 25% penalty charge on the withdrawal amount, applied by HMRC. Because the penalty is 25% of the total fund (including the bonus), and the bonus itself represents 25% of contributions, the effective penalty on the original contribution is higher than 25% in most scenarios. Savers who contribute £1,000 and receive a £250 bonus (total £1,250) would receive £937.50 after the 25% penalty - less than the original £1,000 contributed.
This penalty was temporarily reduced to 20% during the Covid-19 pandemic but reverted to 25% from April 2021.
LISA vs Help to Buy ISA
The Help to Buy ISA closed to new applicants in November 2019. Existing Help to Buy ISA account holders can continue saving and claim their bonus at completion of a first home purchase. The Help to Buy ISA bonus is paid at completion (up to £3,000 maximum) and applies to properties up to £250,000 outside London (£450,000 in London). The LISA allows larger annual contributions and a higher potential bonus but has a single £450,000 property price cap nationally. Savers with both a Help to Buy ISA and a LISA can only use one for a given property purchase.
Frequently Asked Questions
Can two first time buyers both use their LISAs on the same property?
Yes. Two first time buyers purchasing jointly can both use their individual LISA funds toward the same property purchase, provided both buyers meet the first time buyer definition and the property costs no more than £450,000. Each buyer's LISA is treated separately - both accounts are closed and the funds directed to the conveyancer at completion.
What happens to my LISA if I do not use it to buy a property?
LISA funds not used for a qualifying first home purchase remain in the account until the account holder reaches age 60, at which point they can withdraw the entire fund (including all bonuses and growth) tax-free for retirement. If funds are needed before age 60 for any other purpose, the 25% withdrawal penalty applies.
Can I use a LISA alongside a Help to Buy equity loan?
The Help to Buy equity loan scheme in England closed to new completions in March 2023. Where it was available, the LISA could be used alongside it. For current purchases, the LISA can be used alongside other available government schemes such as shared ownership, subject to the specific scheme rules and lender requirements.
Is there a minimum deposit requirement if I use a LISA?
The LISA funds form part of the total deposit, but lenders impose their own minimum deposit requirements (typically 5-10% of the purchase price). The LISA funds plus any other savings must together meet the lender's minimum deposit requirement. The mortgage is assessed on the normal basis regardless of whether part of the deposit comes from a LISA.
