Lifetime ISA for a first home: rules, 25% charge, cap

Who can open one

GOV.UK sets these conditions:

• you must be 18 or over but under 40 to open a Lifetime ISA;
• you must live in the UK, or be a member of the armed forces or a Crown servant (or their spouse or civil partner) if you live abroad;
• you must make your first payment before you are 40;
• you can pay in until you are 50; after that you can no longer pay in or earn the bonus, but the account stays open.

You can hold cash, stocks and shares, or both.

What you can pay in and what you get

You can put in up to £4,000 a year. That counts towards your overall ISA limit, which GOV.UK gives as £20,000 for 2026 to 2027. The government adds 25% of what you pay in, up to £1,000 a year.

Using it to buy a first home

To withdraw the savings and bonus for a first home with no charge, GOV.UK lists these conditions, all of which must be met:

• the property costs £450,000 or less;
• you buy at least 12 months after you make your first payment into the Lifetime ISA;
• you use a conveyancer or solicitor to act for you in the purchase (the ISA provider pays the funds directly to them);
• you are buying with a mortgage;
• you cannot use the savings if the private mortgage comes from a relative, such as a parent, grandparent, child, grandchild or sibling, or certain relatives of your spouse or civil partner.

If the person you are buying with also has a Lifetime ISA, you can both use your savings and bonus, provided you are both first-time buyers and each meets all the conditions above.

The £450,000 limit refers to the price of the property. It is a single UK-wide figure. For average prices by nation, see areas and by nation.

The 25% withdrawal charge

GOV.UK states: “You’ll pay a withdrawal charge of 25% if you withdraw cash or assets for any other reason.” The page read does not detail what the charge is applied to, so the calculation below assumes it applies to the whole amount withdrawn.

A calculation using the official figures: if you paid in the maximum £4,000 and received the £1,000 bonus, you would hold £5,000 (before any interest or growth). A 25% charge on that amount would be £1,250, leaving £3,750. That is less than the £4,000 you paid in, which is why a failed property plan can cost you some of your own money. This is a calculation from the rules above, not a figure published by GOV.UK.

Penalty-free withdrawals other than a first home

• when you are 60 or over;
• if you are terminally ill, with less than 12 months to live.

Practical points

• Start early. The 12-month wait runs from your first payment, so open the account well before you expect to make an offer.
• Tell your conveyancer. The provider pays the money to the conveyancer or solicitor, which affects how your deposit arrives. The page I read does not give timescales for this payment, so ask your provider.
• Check the price. If the final price rises above £450,000 the penalty-free route closes.
• A mortgage is required. Buying outright with a Lifetime ISA does not qualify for the first-home route.
• Check the lender. Whether your lender accepts a Lifetime ISA deposit and any related conditions is a question for the lender or an adviser. See the deposit guide.

Which professional to consult

A conveyancer or solicitor must act in the purchase for you to use the first-home route; see the conveyancer page. A mortgage adviser can check how a Lifetime ISA deposit sits with a lender’s requirements; see the mortgage adviser page.