LISA · First-Time Buyers · UK
7 minute read · Updated February 2026
The Lifetime ISA was designed with first-time buyers in mind — and on paper, a 25% government bonus on your savings sounds like one of the best deals in personal finance. But there are enough restrictions and rules that many buyers dismiss it without fully understanding what they're turning down. Here's what you actually need to know.
You can contribute up to £4,000 per year into a Lifetime ISA. The government adds 25% on top — so a maximum bonus of £1,000 per year. The bonus is paid monthly into your account and immediately starts earning returns alongside your own money.
When you buy your first home, the entire LISA pot — your contributions, the government bonus, and all investment growth — is paid directly to your conveyancer as part of the purchase. You don't receive it as cash; it goes straight to completing the property purchase.
| Scenario | Years saving | Your contributions | Government bonus | Total (before growth) |
|---|---|---|---|---|
| Saving for 3 years | 3 | £12,000 | £3,000 | £15,000 |
| Saving for 5 years | 5 | £20,000 | £5,000 | £25,000 |
| Saving for 8 years | 8 | £32,000 | £8,000 | £40,000 |
| Couple, 5 years each | 5 | £40,000 | £10,000 | £50,000 |
Add investment growth on top (a Stocks & Shares LISA in a global index fund might return 5–7% annually), and the numbers improve further. Over 5 years at 6%, a £25,000 pot becomes approximately £31,000 — all for maximum contributions of £4,000/year.
The question many people ask is whether the bonus is worth the restrictions. Here's a simple comparison for a 5-year saving period:
| Saving method | Annual saving | After 5 years (4.5% cash interest) |
|---|---|---|
| Cash savings account | £4,000 | ~£22,000 |
| Cash LISA (4% interest) | £4,000 | ~£26,500 (inc. bonus) |
| Stocks & Shares LISA (6% return) | £4,000 | ~£29,500 (inc. bonus) |
The LISA wins by a meaningful margin in all realistic scenarios — as long as you satisfy the eligibility criteria. The only reason not to use one is if you're buying above £450,000, you're already 40, or you're genuinely uncertain enough about buying that you'd rather keep your money fully flexible.
If your plans change and you don't buy a qualifying property, your LISA can be used for retirement from age 60 instead — so it's not necessarily wasted if the home purchase doesn't happen. Alternatively, you can withdraw the money at any time with a 25% penalty charge, which effectively costs you slightly more than the bonus you received.
If you're under 40, buying a property under £450,000, and your timeline is at least 12 months away — open a LISA immediately, even with a small amount, to start the clock. The 25% government bonus is one of the most straightforward financial gifts available to UK savers and there's very little reason to leave it unclaimed.
See how the 25% bonus stacks up against ISA, pension, and mortgage overpayment over your timeline.
Open the free LISA calculator →