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Lifetime ISAs let you earn a 25% bonus on your savings towards your first home or retirement. But what's the catch? We explain how LISAs work, the pros and cons and - most importantly - how to find the best lifetime ISA.
For more of July’s best Lifetime ISAs (cash) and the best Lifetime ISAs (stocks and shares), read on.
A Lifetime ISA, or LISA for short, is a type of account designed to encourage people to save for their first home or their retirement.
Anyone aged 18-39 can open a Lifetime ISA and you can save up to £4,000 each tax year into it and the government will give you a 25% bonus on your contributions, up to a maximum of £1,000 per year.
This government top up definitely makes it a product worth considering to boost your savings.
Lifetime ISAs have proved popular: since they were introduced in 2017, 6% of adults who have ever been eligible have opened a LISA with around 1.3 million accounts still open, according to the government figures.
But with so many providers offering them you’ll want to make sure you pick the best Lifetime ISA.
You don’t have to make life’s big financial decisions alone. Get the right IFA for you today with our partners at Unbiased.
You can save into your LISA by putting in a lump sum, regular savings or just putting away money when you can. And the government will add a 25% bonus of up to £1000 a year until you’re 50.
This means if you save the maximum £4,000 in a year you’ll get the full £1,000 bonus.
Your bonus will be paid monthly, provided you’ve contributed that month. And it usually takes between four and nine weeks to hit your account.
There are two types of LISAs – cash LISAs and stocks and shares LISAs. But while you can hold more than one LISA at any given time you can only pay into one LISA in each tax year.
You can use your Lifetime ISA savings to buy a home worth up to £450,000. But this cap hasn’t changed since the Lifetime ISA was introduced in 2017, despite house prices rising 35% in that time. At HomeOwners Alliance, we believe this cap needs to increase to reflect increasing house prices.
If you can’t use your Lifetime ISA to buy a house because it costs more than the £450,000 threshold, you’ll need to leave your savings in the account until you’re 60 (unless you’re terminally ill) – or you’ll have to pay a penalty to withdraw it.
On 30 June 2025, the Treasury Committee said if LISA funds were withdrawn early, people don’t just lose the government bonus – they’ll lose 6.25% of their own savings too.
The government said it would respond to the committee in due course.
Looking for the best Lifetime ISA? Here are our cash LISA top picks for this month:
| Provider | Rate (AER variable) | Accept transfers from other types of ISA? | How to open/manage | Interest paid |
|---|---|---|---|---|
| Moneybox | 4.76% (drops to 3.30% after 1yr) | Yes (only if you haven’t had a Moneybox LISA before) | App | Monthly |
| Plum | 4.75% (drops to 3.61% after 1yr) | Yes (Only from existing LISAs) | App | Monthly |
| Tembo | 4.33% | Yes (Only from existing LISAs) | App | Monthly |
| Paragon | 3.51% | Yes (Only from existing LISAs) | Online | Annually |
| Bath Building Society | 3.10% | No | Online/ branch | Annually |
| Skipton Building Society | 2.55% | Yes | Online | Annually |
If you want to put in the full £4,000 allowance a year and split payments equally over 12 months you can contribute £333.33 into your LISA per month.
| Monthly payment | Yearly payment |
|---|---|
| £333.33 | £4,000 |
If you open a LISA at 18 and add the maximum deposit of £4,000 per year until you’re 50 you’ll get the maximum bonus of £33,000.
With stocks and shares LISAs it’s vital you know your investments can go up and down. Given the limitations of making withdraws from a Lifetime ISA, you should consider this carefully. For example, what you would do if the value of your stocks and shares Lifetime ISA drops around the time you want to use it?
But providing you’re happy with the risk involved you’ll want to make sure you choose the right provider. You should always check any fees before taking the plunge when you’re choosing the best Lifetime ISA.
Here are our top picks for stocks and shares LISA providers this month.
If you’re looking for investment advice speak to an Independent Financial Adviser (IFA).
You don’t have to make life’s big financial decisions alone. Get the right IFA for you today with our partners at Unbiased.
The advantages of a LISA are:
The biggest advantage is the bonus rate of 25% which is extremely generous. The bonus you’ll receive is on contributions not on interest or investment growth.
Once your bonus is in your account it will be treated like the rest of your savings. This means you’ll earn interest on it if you have a cash LISA, or you’ll earn investment growth (or loss) if it is an investment LISA.
However to get the most out of your LISA make sure you shop around to find the best Lifetime ISA – jump to our top Lifetime ISAs this month.
Another benefit is that you can use the Lifetime ISA money to buy any home (not just new builds) worth up to £450,000, or put it towards your pension income after you reach 60.
Saving to buy your first home? See our calculator to see how much you can afford to borrow
It might sound like opening a LISA is an obvious choice if you’re planning to buy your first home but there are some factors you’ll need to consider:
To find the best cash Lifetime ISA, check where you can get the best rate of interest and any other terms – see our top pics above.
While with a Stocks and Shares LISA you’ll want to check things like fees, the minimum investment and any other terms.
Once you have a LISA, you can always switch provider if it means getting a better deal.
So keep tabs on your account and be prepared to switch to a different provider if you want to make sure you get the best deal. You can also switch providers if you have a stocks and shares ISA.
If you’ve ever owned a property before even if it’s not in the UK you can’t use your LISA savings towards buying a home. And this even includes if you inherited a property or even a share of one.
To be able to use your LISA savings towards a home purchase it must cost £450,000 or less. And you’ll need to take out a residential mortgage. So this means you can’t be a cash buyer or be buying a property that you plan to rent out.
If you want to use your LISA savings and the bonus towards buying your first home your account will need to have been open for at least a year. So if you’re hoping to get on the property ladder within the year and you haven’t opened a LISA yet you won’t be able to use this scheme.
So if you’re considering buying your first home in the future it’s a good idea to open an account as soon as possible – you only need to deposit £1 to open one. Then you can always decide further down the line if it’s the right place for your savings but at least you will have started the clock ticking.
So you’ve been saving diligently into the best Lifetime ISA and now you want to use the cash – what happens next?
What if you’re planning to use your LISA for retirement? These rules could change but currently:
You can hold a Help to Buy ISA and a Lifetime ISA. But if you hold both, you can only use the government bonus towards buying a house via one of the accounts.
You can transfer a Help to Buy ISA into a LISA but the amount you transfer will count towards your yearly £4,000 limit. For example, if you transfer £3,000, you can only save another £1,000 in that year.
While you may be able to get a bigger bonus with a LISA (the maximum possible bonus with a Help to Buy ISA is £3,000) LISAs offer less flexibility if you want to withdraw your money. With LISAs you’ll need to pay a penalty if you withdraw your money for any reason other than buying a home or for your retirement. This isn’t the case with the Help to Buy ISA.
Remember, there is no guarantee that future governments will maintain these offers, which means there could be a risk to bonuses. And it’s not easy to access your money tied up in a LISA – the withdrawal payments are expensive, so don’t save more than you can afford to lock away. See our guide on government schemes to help you buy a home.
If you think you might need to access your savings you should consider another form of savings accounts.
When you’re ready to buy your first home, ask your LISA provider to transfer the money from your LISA directly to your conveyancer, not to you. (If you withdraw it into an account in your name, you’ll pay a hefty withdrawal charge). All your savings, including your bonus, will be available to use when you exchange.
You’ll usually need to save a deposit of at least 5% – and using a Lifetime ISA may offer you a big boost in getting there. And you’ll need to shop around for the best mortgage too. Find out more in our guide on First time buyer mortgages.
You can withdraw your savings to buy your first home, providing you meet the criteria. Or when you reach 60 or if you’re diagnosed with terminal ill health. But you’ll have to pay the penalty of 25% on your savings if you want to withdraw it in any other circumstance
HomeOwners Alliance Ltd is registered in England, company number 07861605. Information provided on HomeOwners Alliance is not intended as a recommendation or financial advice.
Mortgage service provided by London & Country Mortgages (L&C), Unit 26 (2.06), Newark Works, 2 Foundry Lane, Bath BA2 3GZ, authorised and regulated by the Financial Conduct Authority (FRN: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
HomeOwners Alliance Ltd is an Introducer Appointed Representative (IAR) of LifeSearch Limited, an Appointed Representative of LifeSearch Partners Ltd, authorised and regulated by the Financial Conduct Authority. (FRN: 656479).
Independent Financial Adviser service is provided by Unbiased, who match you to a fully regulated, independent financial adviser, with no charge to you for the referral.
Bridging Loan and specialist lending service provided by Chartwell Funding Limited, registered office 5 Badminton Court, Station Road, Yate, Bristol, BS37 5HZ, authorised and regulated by the Financial Conduct Authority (FRN: 458223). Your property may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it.
