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Complete Guide to Lifetime ISA for First Home Buyers 2025
What is a Lifetime ISA?
A Lifetime ISA (LISA) is a tax-free savings account designed to help first-time buyers save for their first home or retirement. The UK government adds a 25% bonus to your savings, up to a maximum of £1,000 per year. You can save up to £4,000 per year and receive £1,000 in bonus, giving you £5,000 total annual growth.
Example: Save £200/month (£2,400/year) and receive £600 bonus = £3,000 total. Over 4 years: save £9,600 + receive £2,400 bonus = £12,000 total for your deposit.
Lifetime ISA Key Facts 2025
- Age eligibility: 18-39 to open, can contribute until age 50
- Annual limit: £4,000 maximum contribution
- Government bonus: 25% (£1,000 maximum per year)
- Property limit: £450,000 maximum for first home
- Holding period: Must hold for 12 months before first home purchase
- Withdrawal penalty: 25% charge if withdrawn for non-qualifying purposes
How Much Can You Save with a Lifetime ISA?
The amount you can accumulate depends on your monthly contributions and savings period. Here are realistic scenarios:
Maximum lifetime savings: £40,000 contributions + £10,000 bonus = £50,000 total (over 10 years at maximum £4,000/year).
Frequently Asked Questions
Everything you need to know about Lifetime ISA for first home buyers
How does the 25% government bonus work?
The government adds 25% to your Lifetime ISA savings, up to £1,000 per year. If you save £4,000 in a year, you receive £1,000 bonus = £5,000 total. If you save £2,400/year, you receive £600 bonus = £3,000 total. The bonus is paid monthly or quarterly depending on your provider, typically within 4-8 weeks of your contribution.
Can I withdraw money from my Lifetime ISA?
Yes, but with restrictions. You can withdraw penalty-free for: (1) First home purchase up to £450,000, (2) Retirement at age 60+, (3) Terminal illness. For any other reason, you pay a 25% withdrawal charge, which effectively removes the bonus plus a small portion of your original savings. Example: withdraw £5,000 (£4,000 savings + £1,000 bonus), pay £1,250 charge, receive £3,750.
What is the maximum property value for first home purchase?
£450,000 is the maximum property value to use your Lifetime ISA for first home purchase. This applies across the entire UK (England, Scotland, Wales, Northern Ireland). Properties above £450,000 don't qualify, and you'd need to withdraw with the 25% penalty or keep saving for retirement. This limit is significantly higher than the old Help to Buy ISA (£250,000).
How long must I hold a Lifetime ISA before buying?
You must hold your Lifetime ISA for at least 12 months before using it for a first home purchase. This means if you open an account in January 2025, you can use it from January 2026 onwards. However, you can continue contributing during this 12-month period and receive the 25% bonus. Plan ahead: if you're buying within 12 months, a Lifetime ISA won't be available in time.
Can I have both a Lifetime ISA and Help to Buy ISA?
Yes, you can hold both accounts, but you can only use the bonus from ONE for your first home purchase. Help to Buy ISA closed to new accounts in November 2019, but existing accounts can continue. Most people benefit more from Lifetime ISA due to higher limits (£4,000/year vs £2,400/year) and higher property limit (£450,000 vs £250,000). You cannot transfer Help to Buy ISA to Lifetime ISA.
What happens if I'm buying with a partner?
Both partners can use their Lifetime ISA bonuses for the same property purchase, effectively doubling your bonus. Example: Partner A has £12,000 LISA (£9,600 + £2,400 bonus), Partner B has £12,000 LISA = £24,000 combined deposit. Both must be first-time buyers and the property must be under £450,000. This is one of the biggest advantages of Lifetime ISA for couples.
Can I transfer my Lifetime ISA to another provider?
Yes, you can transfer your Lifetime ISA to another provider without losing the bonus or affecting your annual £4,000 limit. The transfer must be done directly between providers (not withdrawn and redeposited). Reasons to transfer: better interest rates, better investment options, or better customer service. Most providers complete transfers within 15-30 days. Check for any transfer fees before moving.
Should I choose cash or stocks & shares Lifetime ISA?
Cash LISA: Fixed interest (typically 2-4%), no risk, suitable if buying within 5 years. Stocks & Shares LISA: Potential higher returns (5-8% average), market risk, suitable if buying in 5+ years or saving for retirement. For first-time buyers planning to purchase within 3-5 years, cash LISA is generally safer. For longer timelines (7+ years), stocks & shares may grow more despite market volatility. Consider your risk tolerance and timeline.