How to use your Lifetime ISA to buy a home

The tax-free savings account, which launched in April 2017 allows anyone aged over 18 and under 40 to put in up to £4,000 each tax year, until you’re 50. Any money saved in a LISA receives a 25% bonus from the government. So there's a maximum of £1,000 you can earn as a bonus each year. 

The bonus is paid monthly on any new money deposited. This means savers don’t have to wait another year to further boost their home deposit.

From April 2029, Lifetime ISAs will be replaced by a new First-time buyer ISA.  

Like the Lifetime ISA, you’ll still be able to save up to £4,000 each year and receive a 25% bonus when you use the money to buy your first home, as long as it costs £450,000 or less - but this ISA will have no upper age limit.

If you already have a LISA, you can carry on using it and paying into it in the same way. You'll also keep the government bonuses you've built up. You won’t be able to open a new LISA after April 2029. 

If you've had your Lifetime ISA  (or LISA) for over a year, you're able to cash it out as a first-time buyer, but you have to make sure you're following the rules. 

As well the LISA needing to have been open for a year, there are a few conditions that need to be met before the savings and bonus can be used on a home purchase.

The home must:

• be in the UK 
• be the first home you own
• be purchased with a mortgage (i.e. not cash)
• cost £450,000 or less
• be where you live.

You can also buy with another first-time buyer and both use a LISA and bonus, however the rules above still apply. Or you can use it to buy with someone who isn’t a first-time buyer, though they can’t use their own LISA towards the purchase.

If you’re thinking of taking advantage of a shared ownership scheme, then the total price of the property – so your percentage of equity plus the remaining equity – must be £450,000 or less.

That might sound like a lot, but according to figures for August 2026 from the Office or National Statistics (ONS), the average price for a home in the UK is  £273,000 and £554,000 in London. When it comes to the time to buy your first home, you might find yourself close to that £450,000 limit.

If your first home costs over £450,000, you'll pay a charge to take the money out. From 29 October 2026, this falls from 25% to 20%. This means you’ll get back at least what you put into your Lifetime ISA.

As long as the home you’re buying fits the above list, then it’s time to get hold of the cash. But don’t just withdraw it. Do this and you’ll pay charges. Instead you need to apply to the LISA provider for the money to be sent to your solicitor or conveyancer.

The money can be used for your exchange deposit (the money you hand over when you “exchange” contracts). However, this has to be done less than 90 days ahead of your completion, when you hand over the rest of the money and get the keys.

If the sale falls through your conveyancer will be able to put the money and bonus back into your LISA - though it must be the exact same amount.

However, if there was mistake and you weren’t eligible to use the bonus, say the property actually costs more than £450,000, then you’ll be hit with withdrawal charges – so make sure you can use the cash before it’s taken out of the LISA.

If you’ve changed your mind – perhaps the house you want to buy costs more than £450,000, or maybe you just can’t afford to buy – then you’ve a couple of options.

If you choose to take out the money you’ve saved for any reason other than buying a qualifying first home, then you’ll be hit with a 25% charge. This not only removes the bonus you’ve been paid, but also takes out some of your savings.

For example, if you’ve saved the maximum £4,000 a year for five years (£20,000), the government will have given you £1,000 (25%) a year on top of your savings, boosting your money to £25,000. But if you take out the money, you’ll have to pay back 25% of it, leaving you with just £18,750. 

A better option is to leave the money in the LISA until you reach 60 years old. Then you can access it without any charge. You can keep saving into the account until you are 50 years old.