How it works
- Open one if you are aged 18 to 39. You can keep paying in until you are 50.
- Pay in up to £4,000 each tax year (April to April). It counts towards your £20,000 overall ISA allowance.
- The government adds 25%: up to £1,000 a year. Paid monthly, automatically.
- Cash LISAs pay interest on top; stocks and shares LISAs invest it.
The three rules
- The home must cost £450,000 or less. Anywhere in the UK. Over that, you cannot use the LISA for it, and withdrawing for anything else costs you.
- The account must be open 12 months before you use it. Open one now with £1 in it, even if you are years away, to start the clock.
- You must be a first-time buyer, buying with a mortgage, to live in. If two of you each have a LISA, you can both use them on the same home.
The catch: the withdrawal penalty
Take money out for anything other than a first home (or after 60, or terminal illness) and you pay a 25% charge on the withdrawal. Because that is 25% of the total, not 25% of the bonus, you get back less than you put in. Example: pay in £4,000, get £1,000 bonus, pot is £5,000. Withdraw it all for a holiday: charge £1,250, you receive £3,750. So only put in money you are sure is for the house.
Using it to buy
Your solicitor requests the money from the LISA provider; it goes straight to them, not you. Tell your solicitor early, and allow 30 days. It can be used for the deposit at exchange.
LISA vs Help to Buy ISA
If you still have a Help to Buy ISA, the LISA is usually better: bigger annual limit (£4,000 vs £2,400), higher price cap (£450,000 vs £250,000, or £450,000 in London), and the bonus can be used at exchange rather than completion. You can transfer a Help to Buy ISA into a LISA.
A note on the numbers. Thresholds, schemes and typical costs are correct as far as we know at the time of writing and are for England and Northern Ireland unless we say otherwise. Rules change and lenders differ. Check the current position, and get advice from a qualified broker before you commit.
Quick answers
What if house prices where I live are over £450,000?
The LISA cannot be used and the penalty applies to withdrawals. If you think that is likely, a normal cash ISA or savings account is safer. If it is borderline, a LISA with modest contributions plus other savings is a hedge.
Can I have a LISA and another ISA?
Yes. The £4,000 LISA limit sits inside the £20,000 overall ISA allowance.
I'm 39. Is it too late?
No, as long as you open it before your 40th birthday. You can keep paying in until 50.
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