Lifetime ISA Calculator

LISA explained: the rules, the bonus, and the catch

The Lifetime ISA is genuinely one of the best deals available for first-time buyers and long-term savers — the government adds £1 for every £4 you save. But it comes with strict rules that catch people out. Here's what you actually need to know.

What is a Lifetime ISA?

A LISA lets you save up to £4,000 per year, and the government adds a 25% bonus paid directly to your provider each month. This is free money: save the full £4,000 and you get £1,000 extra. That bonus itself then earns investment returns (or interest) until you access it.

You can open a LISA if you're aged 18 to 39. Your LISA allowance is part of your £20,000 overall annual ISA allowance.

The two valid uses

You can only use a LISA without penalty for:

• Buying your first home — the property must cost £450,000 or less. The LISA must also have been open for at least 12 months, and you must never have owned a property before (including overseas).
• Retirement from age 60 — from your 60th birthday, you can withdraw the whole pot completely tax-free for any purpose.

The withdrawal penalty (read this carefully)

If you take money out for any other reason, a 25% charge applies to the amount you withdraw. This is not just giving back the bonus — the maths is nastier:

• You save £8,000. Government adds £2,000 bonus. Total: £10,000.
• You withdraw the £10,000. Penalty: 25% × £10,000 = £2,500.
• You receive £7,500 — which is £500 less than you put in.

The government temporarily reduced this charge to 20% during the pandemic (meaning you got back exactly what you put in). The standard 25% rate has since been restored. Only open a LISA if you're committed to the use case.

Contributions stop at age 50

You can't pay new money into a LISA after your 50th birthday. The pot keeps growing after that, but no new contributions and no more bonus. The calculator marks this point on the chart when it's relevant to your scenario. For a 30-year-old saving for retirement, that's still 20 years of contributions and 10 years of growth before access at 60.

The £450,000 property limit problem

The first-home price cap has been frozen at £450,000 since the LISA launched in 2017. Average UK house prices are now above £280k nationally — fine for many buyers — but in London, Bristol, Oxford, Cambridge and much of the South East, a typical first home costs more than £450k. If your target area pushes you above the threshold, the LISA cannot be used for the purchase. You'd be stuck either paying the withdrawal penalty or leaving the money locked until you're 60. Check whether your target market is realistically under £450k before making the LISA a central pillar of your deposit strategy.

LISA vs pension for retirement saving

Both offer tax-efficient sheltering, but they work differently:

• A pension gets tax relief at your marginal rate — 20% for basic-rate taxpayers, 40% for higher rate. That beats the LISA's flat 25% if you pay 40% tax on your contributions.
• LISA withdrawals from age 60 are completely tax-free. Pension income is taxed (beyond the 25% tax-free lump sum). For a basic-rate taxpayer in retirement, the LISA's tax-free withdrawals can make it more efficient than a pension despite the similar upfront bonus.
• Pension access is rising — from 55 to 57 in 2028, and likely to keep tracking the state pension age. LISA access at 60 is fixed in statute.
• Employer pension contributions are free money that the LISA can't match. Always take the full employer match before routing money to a LISA.

For most people the sensible order is: max employer pension match → LISA (if eligible and committed) → additional pension or S&S ISA.

Stocks & Shares LISA vs Cash LISA

The same logic as the ISA choice applies. If you're buying a home within the next few years, a Cash LISA removes market-timing risk from your deposit. If you're saving for retirement 20+ years away, a Stocks & Shares LISA gives the bonus far more room to compound — and the gap between the lime line and the grey line on the chart above shows exactly how much the compounding bonus is worth over time.