Comparison · First-Time Buyers · UK
7 minute read · Updated February 2026
Saving for your first home? You have a choice between a standard Stocks & Shares ISA and a Lifetime ISA with a 25% government bonus. The LISA sounds obviously better — free money — but the restrictions mean it is not always the right choice. This guide is specifically for first-time buyers in the UK.
| Stocks & Shares ISA | Lifetime ISA | |
|---|---|---|
| Government bonus | None | 25% on contributions |
| Annual limit | £20,000 | £4,000 (max £1,000 bonus/yr) |
| Property price cap | None | £450,000 — hard limit |
| Minimum hold | None | 12 months before using for home |
| Flexible access | Yes — withdraw anytime | No — 25% penalty outside rules |
| Age to open | Any adult | Must open before 40 |
| Mortgage required | No | Yes — cash purchases don't qualify |
In all these cases the 25% bonus is substantial. On maximum contributions over 5 years that is £5,000 in free government money — plus investment growth on top. Full guide: LISA for First-Time Buyers: Is the 25% Bonus Worth It?
Outside London the average first home is around £280,000–£320,000 — well within the cap. In London the average is well above £450,000, which excludes many buyers entirely. Check average prices in your target area before building a LISA-only strategy. You don't want to accumulate years of LISA contributions only to find the property you want exceeds the cap.
| Your situation | Recommended approach |
|---|---|
| Under 40, buying below £450k, 12+ months away | LISA first, then ISA for overflow |
| Buying above £450k or need flexibility | ISA |
The 25% government bonus sounds abstract until you put real numbers to it. Here is what it means over different saving timescales on maximum contributions:
| Years saving | Total contributed | Government bonus | Total before growth |
|---|---|---|---|
| 1 year | £4,000 | £1,000 | £5,000 |
| 2 years | £8,000 | £2,000 | £10,000 |
| 3 years | £12,000 | £3,000 | £15,000 |
| 5 years | £20,000 | £5,000 | £25,000 |
On top of the bonus, investment growth compounds on the full balance including the bonus. A £5,000 pot after year one (£4,000 contributed, £1,000 bonus) at 7% annual growth adds a further £350 in year two before you contribute again. The bonus itself compounds — which is what makes the LISA genuinely powerful for longer saving horizons.
The property price cap is the LISA's most significant practical limitation. At £450,000, it excludes a large proportion of properties in London, the Home Counties, and parts of the South East and South West.
The risk is not just buying above the cap today — it is that property prices rise between when you start saving and when you buy. If you start saving in Sheffield targeting a £280,000 property and the market moves to £350,000 over five years, you are still inside the cap. If you start saving in Bristol targeting a £380,000 property and prices rise to £460,000, you have a problem.
If there is any realistic chance your target property will exceed £450,000, either use an ISA instead, or use both (LISA for the bonus on £4,000 per year, ISA for the rest) and be prepared to repay the LISA with the penalty if needed. The penalty on a small LISA pot may be worth absorbing if the alternative is missing out on years of bonuses on a larger ISA balance.
Each person has their own LISA allowance. A couple buying together can each contribute £4,000 per year and each receive the £1,000 bonus — £2,000 in combined government money per year, or up to £10,000 over five years, entirely free. Both LISAs can be used toward the same property purchase as long as both buyers are first-time buyers and the property qualifies.
This makes the LISA particularly compelling for couples saving together. The ISA cannot match £2,000 per year in free government contributions regardless of the tax advantages.
For most first-time buyers outside London buying below £450,000 with at least 12 months to save: open a LISA today — even with £1 to start the clock — and use an ISA for savings above £4,000/year. If you are in London or need full flexibility, stick with an ISA.
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