UK Lifetime ISA (LISA) Calculator 2024-25

What is a Lifetime ISA and how does the government bonus work?

A Lifetime ISA (LISA) is a tax-free savings account for UK residents aged 18–39. You can contribute up to £4,000 per year, and the government adds a 25% bonus on your contributions — worth up to £1,000 per year. The bonus is paid monthly by HMRC directly into your LISA account, where it also benefits from any investment growth. For example, if you contribute the maximum £4,000, the government adds £1,000, giving you £5,000 invested that year. Over 10 years at the maximum contribution, you could receive £10,000 in government bonuses alone. The LISA allowance of £4,000 counts within the overall annual ISA limit of £20,000.

What are the rules for using a LISA to buy a first home?

To use your LISA for a first home purchase, the property must cost £450,000 or less, you must be a first-time buyer (never owned a residential property anywhere in the world), and the property must be in the UK. You must have held the LISA for at least 12 months before using it for a property purchase. The LISA funds are paid directly to your solicitor on completion — you cannot withdraw the cash and use it separately. If you are buying with another person who also has a LISA, you can both use your LISAs toward the same property purchase as long as you are both first-time buyers. If the property costs more than £450,000, you cannot use the LISA at all for that purchase.

What happens if I withdraw from a LISA for other reasons?

If you withdraw from a LISA for any reason other than a qualifying first home purchase or retirement from age 60, you incur a 25% withdrawal charge on the amount withdrawn. This charge is designed to claw back the government bonus plus a 6.25% penalty on your own contributions. For example, if you contributed £4,000 and received a £1,000 bonus (total £5,000), a 25% withdrawal penalty on £5,000 is £1,250 — meaning you only receive £3,750 back, losing £250 of your own money in addition to the entire bonus. The penalty was temporarily reduced during COVID-19 to 20% but returned to 25% in April 2021. The penalty does not apply if you are diagnosed with a terminal illness.

Can I have both a LISA and a workplace pension?

Yes, absolutely. A LISA and a workplace pension serve different purposes and you can have both simultaneously. Many financial advisers recommend using both: maximise any employer pension matching in your workplace scheme first (as employer contributions are effectively free money), then consider using a LISA for additional retirement or first home savings if you are eligible. For retirement planning, the key comparison is between a pension (which gives upfront tax relief but is taxed on withdrawal) and a LISA (which gives the 25% bonus but withdrawals are tax-free). For basic rate taxpayers, the LISA bonus (25%) and pension tax relief (20% grossed up from net) are roughly equivalent. Higher rate taxpayers generally benefit more from pension contributions due to 40% upfront relief.