A Guide to a Lifetime ISA

Are you considering opening a Lifetime ISA (LISA)? If, however, you know very little about the account, we answer some of your most-asked questions below.

These include:

‘What is a Lifetime ISA?’
‘How much can I save in a Lifetime ISA?’
‘Will a Lifetime ISA help me get on the property ladder?’.

What is a Lifetime ISA?

You may have heard friends, family and colleagues talk about the ‘Lifetime ISA’ – but what is it?

A Lifetime ISA (Individual Savings Account), or ‘LISA’, is designed to help you buy your first property. Alternatively, you can use the account to set yourself up financially for later life.

Anyone who is considering opening a LISA must be aged 18 or over (but under the age of 40) – and you can deposit up to £4,000 per year into the account, until you’re aged 50.

If you are considering opening an account, be aware that you must also ensure you make your first payment into your LISA before you're 40.

Is the Lifetime ISA a tax-free savings account?

Yes it is. You can save up to £4,000 tax-free every year into your Lifetime ISA, which means your savings and any interest will be free of capital gains and income tax.

This £4,000 limit forms part of your overall £20,000 ISA allowance the government grants you each year*.

*Find out more about your ISA contribution limits here.

How does the Lifetime ISA government bonus work?

The government bonus for a Lifetime ISA (LISA) is 25% of the amount you contribute. Since you can contribute up to £4,000 per tax year, this means the maximum bonus amount you could receive from the government is £1,000.

However, it is important to remember that the government charges a penalty for those withdrawing from a Lifetime ISA early. This charge is to ensure the account is used for its intended purposes and recover any bonuses they have paid.

Will a Lifetime ISA help me get on the property ladder?

From 1 April, stamp duty is changing, and the current limit of £425,000 (for first-time buyers) will be reduced to £300,000. Approximately a fifth of first-time buyers are expected to be impacted by the changes in 2025.

So, depending on where you live, saving for your first home could be about to become a little bit harder, as you may now have to factor in this additional cost. But first-time buyers shouldn’t put aside their savings goals.

However, rather than focusing on the larger deposits of up to £4,000 per year, aim for smaller financial goals, and deposit what you can afford into the account. Even if you can only save £20 per week, you’ll have £1040 by the end of the year. With the Government’s bonus of 25%, you’ll still receive £260 towards a new home.

Of course, if you deposit less money into the account over the year, it will take you longer to save for a deposit, but you can always increase your monthly payments when you are more financially stable.

What if I’m not a first-time buyer; can I still open a Lifetime ISA?

While the scheme is designed to help first-time buyers get a foot on the property ladder, anyone over the age of 18 years old and under 40 can open one and save a tax-free lump sum for when they turn 60*.

*This can be used as part of your retirement planning, but should not be used in place of a pension.

What are the limits of the Lifetime ISA?

If like most, you are looking to use a Lifetime ISA to buy a home, there are a few restrictions to consider.

As only first-time buyers can use Lifetime ISAs to buy a home, this means you can’t own, or have owned, a home in the UK. You’ll also need to:

Buy a home for no more than £450,000
Be purchasing a home you plan to live in
Use a traditional repayment mortgage.

Make sure you read our recent piece on what kind of home £450k will get you across the country.

Did you know? You can combine your Lifetime ISA with other schemes, such as shared ownership. You can find out more on the government’s Own Your Home website.

Can I transfer money from a Child Trust Fund (CTF) to a LISA?

Yes – and some of our customers do just that, transferring the money from their CTF to a LISA with Unity Mutual.

If you were born between 1 September 2002 and 2 January 2011 and have a Child Trust Fund (make sure you read our article all about Child Trust Funds), you may find you have a savings pot ready to put towards your house deposit already.

You can transfer the funds from the Child Trust Fund into a Lifetime ISA as long as you’re aged 18 or over.

Can my partner and I open a joint Lifetime ISA?

Lifetime ISAs are only available as individual accounts, joint LISAs don’t exist.

This means you and your partner will need to open separate accounts. However, you can use both LISAs when purchasing your property, but you must both qualify as first-time buyers to use both LISAs.

What happens if I need to withdraw money from my LISA early?

If you want to withdraw money from your Lifetime ISA within the first 12 months of opening your LISA, or if you decide to purchase a property over the maximum value of £450,000 and require the funds in your LISA, you’ll need to pay a 25% charge on both your original savings and your government bonus (see FAQs for more information).

Are my savings protected with a Lifetime ISA?

When you take out our stocks and shares LISA, your savings are 100% protected – with your LISA covered by the UK’s Financial Services Compensation Scheme (FSCS).

Have any more questions about the Lifetime ISA?

Head to our dedicated Lifetime ISA page for all the information about the account, including details on our interest rate, terms and conditions, and instructions on how to apply.

Can’t find what you’re looking for? Do not hesitate to contact the Unity Mutual team; we’ll be more than happy to answer any of your questions. You can also keep up to date with our latest articles here on our Knowledge Hub.

If you need financial advice

If you’re in any doubt about whether this product is right for you, it’s a good idea to talk to an Independent Financial Advisor (IFA). You can find a local financial advisor by visiting www.unbiased.co.uk. You may need to pay for a financial advisor’s help, so make sure you ask them about their fees first.

Terms and conditions apply to our Lifetime ISA. For more information read the product’s Terms & Conditions.