The simple maths: £4,000 becomes £5,000
The Lifetime ISA (LISA) gives you a guaranteed 25% return from the government on every pound you save, up to £4,000 a year. So in the 2026/27 tax year, the maximum bonus is £1,000. The bonus is added after you pay in — it lands in your LISA and then grows like the rest of your money.
| You pay in | Government bonus | Total in your LISA |
|---|---|---|
| £1,000 / year | £250 | £1,250 |
| £2,000 / year | £500 | £2,500 |
| £4,000 / year | £1,000 | £5,000 |
| £4,000 × 10 years | £10,000 | £50,000 + growth |
The £4,000 LISA limit counts within your overall £20,000 ISA allowance. The bonus does not use any allowance. GOV.UK — Lifetime ISA · 2026/27
Who can open one
You must be aged 18 to 39 to open a LISA. You can keep paying in until you turn 50, and the bonus keeps applying on each year's contributions up to that point. You can only have one LISA, but you can transfer between providers if you find a better rate.
What the money can be used for
There are only two uses (plus a small number of special cases):
- Buying your first home — the property must cost up to £450,000 and you must not have owned a home before (in the UK or abroad). The LISA must have been open for at least 12 months before you use it.
- Retirement — you can take the money out tax-free from age 60.
Terminal illness and a few other special circumstances allow penalty-free withdrawals.
The 25% charge to avoid
If you withdraw for any other reason, you pay a 25% charge on the amount taken out. Because the bonus is only 25%, this penalty takes back the entire bonus and a little of your own money — so a LISA is not a flexible savings account. The Cash or Stocks & Shares ISA is the better home for money you might need before then.
How it compares to a pension
Both give you a government top-up, but they work differently. A pension gives 20% tax relief (more for higher-rate taxpayers) and locks the money away until 55 (rising to 57 in 2028). A LISA gives a flat 25% bonus and unlocks at 60, but the money can also be used for a first home. For retirement saving, a workplace pension with employer matching usually comes first; a LISA can be a strong addition, especially for basic-rate taxpayers.