Lifetime ISA (LISA)

The Lifetime ISA (LISA) is the most generous standing UK savings incentive for under-40s. Anyone aged 18–39 can open one and contribute up to £4,000 a year (counting toward the overall £20,000 ISA cap), with the government adding a 25% bonus — up to £1,000 a year of free money. Contributions stop being eligible at age 50, but the wrapper keeps growing tax-free.

LISA funds are ring-fenced for two purposes:

1. First-home purchase: the property must be £450,000 or less, the buyer must be a first-time buyer, and the buyer must use a residential mortgage. The LISA must have been open at least 12 months before withdrawal.
2. Retirement: tax-free withdrawal from age 60.

Withdraw for any other reason and you pay a 25% penalty on the amount withdrawn — which more than wipes out the government bonus, leaving you with less than you put in. This is the defining trade-off: the bonus is generous, but the lock-in is severe.

A common stacking strategy combines a LISA with a workplace pension and a Stocks & Shares ISA — the LISA captures the bonus on £4,000 a year, the pension captures higher-rate income-tax relief, and the wider ISA holds the rest of long-term savings.

Use the savings goal calculator to model the bonus uplift toward a first-home deposit.