How much bonus do you get on a Lifetime ISA?

The government adds a 25% bonus on every contribution you make to a LISA, up to £1,000 per tax year. If you contribute the maximum £4,000, you receive the full £1,000 bonus. The bonus is paid directly into your LISA by HMRC, usually within six to eight weeks.

What is the LISA withdrawal penalty in 2026?

The withdrawal penalty is 25% of the total amount withdrawn, including both your contributions and the government bonus. This means you lose the entire bonus plus 6.25% of your own money. On a £5,000 balance (£4,000 contribution + £1,000 bonus), the penalty is £1,250, leaving you with just £3,750.

Can you use a LISA for a property over £450,000?

No. If the property costs more than £450,000, you cannot use your LISA at all for that purchase. There is no option for a partial penalty-free withdrawal. You would need to pay the full 25% penalty to access the funds or find a property within the cap.

Is the Lifetime ISA being scrapped?

Yes. The government launched a consultation on 23 June 2026 to replace the LISA with a new First-Time Buyer ISA from April 2028. The replacement will have no withdrawal penalty but will remove the retirement savings option. Existing LISA holders can continue contributing under current rules indefinitely.

Should I open a LISA or increase pension contributions?

If your employer offers pension matching, always take the full employer match first — that is free money the LISA cannot replicate. After maximising your employer match, a LISA can complement your pension with a 25% bonus and completely tax-free withdrawals from age 60, whereas pension income above the 25% lump sum is taxed.

How long does a LISA need to be open before buying a home?

Your LISA must be open for at least 12 months before you can use it to buy your first home. The clock starts from the date you open the account, even if you only deposit £1. This is why it is important to open a LISA as early as possible.

What happens to my LISA when the replacement launches in 2028?

Existing LISA holders can continue to save into their LISA under the current rules indefinitely. The government has confirmed that opening a new LISA will no longer be possible once the First-Time Buyer ISA launches, but existing accounts remain active with the 25% bonus and current contribution limits.

How much can you save in a LISA by age 50?

Starting at age 18, you can contribute £128,000 and receive £32,000 in bonuses over 32 years. At 7% growth in a Stocks and Shares LISA, this could reach £523,200. Starting at 30, the same contributions over 20 years would reach approximately £210,800 at 7% growth.

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Lifetime ISA 2026: Bonus, Penalties & Growth Guide

By Abdul Basit / August 5, 2026

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