UK Lifetime ISA (LISA) Calculator — Bonus & Penalty

Lifetime ISA Guide

What do I need to know about Lifetime ISA Basics?

The Lifetime ISA (LISA) lets you save up to £4,000 per tax year and receive a 25% government bonus (up to £1,000/year). Eligibility: must be aged 18-39 to open. Can contribute until age 50. Funds can be used: to buy your first home (property price up to £450,000) or accessed from age 60 (penalty-free). The 25% bonus is added monthly by HMRC. Annual bonus maximum: £1,000 (on £4,000 contribution). Total lifetime bonus potential: £32,000 (if contributing maximum from age 18 to 50).

What should I know about The Withdrawal Penalty?

Withdrawing for any purpose other than first home purchase or age 60+ retirement incurs a 25% penalty on the full withdrawal amount. The penalty is 25% of the withdrawal, not 25% of the bonus — this means you lose more than just the bonus. Example: contribute £4,000, receive £1,000 bonus, total = £5,000. Withdraw early: penalty = 25% × £5,000 = £1,250. You receive £5,000 - £1,250 = £3,750 — less than your original £4,000 contribution. This means the LISA is only appropriate if you are confident you won't need the money before age 60 or for a first home purchase, since an early withdrawal for any other reason effectively costs you money beyond just losing the bonus.

What's the key thing to understand about First Home Purchase Rules?

Property price limit: £450,000 (unchanged since 2017 — has not kept pace with house prices in many areas). Must be your first home. Must use a mortgage (cannot buy with cash only). The LISA must have been open for at least 12 months before use. The conveyancer applies the LISA funds directly to the purchase — you cannot receive the cash and use it independently. The £450,000 limit affects affordability in London and the South East particularly — many first-time buyers in expensive areas cannot use the LISA at all for their actual purchase, even after saving into one for years.

What's the difference between LISA and Pension?

For basic rate taxpayers, LISA and pension give effectively the same benefit: both give a 25% uplift. LISA: you contribute £4,000, bonus adds £1,000. Pension: you contribute £800 net, basic rate relief adds £200 gross (same 25% uplift per £1 contributed). For higher-rate taxpayers, pension is significantly better: pension gives 40% tax relief. LISA gives only 25%. A higher-rate taxpayer who contributes the equivalent into a pension reclaims an additional 20% via self-assessment — making pension