Buying Your First Home with a Lifetime ISA?
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What is a Lifetime ISA?

Last Updated: 19/08/2025
352
6 min read

A Lifetime ISA (LISA) is a savings account designed to help first-time buyers save for their first home and for retirement. It works on a simple principle: you save, and the government adds a 25% bonus on top.

However, while a LISA can boost your deposit, it comes with rules on eligibility, contributions, and withdrawals.

This article breaks down everything you need to know about a Lifetime ISA, helping you understand if it's the right choice for your home-buying goals.


Who is eligible for a Lifetime ISA?

You can open and start paying into a Lifetime ISA if you are a UK resident between the ages of 18 and 39. You must be a first-time buyer to use the funds towards a property purchase.

This means you cannot own, or have owned, a home or land anywhere in the world. If you are buying with someone who has previously owned a property, you can still use your LISA towards the purchase, but they cannot.

Once opened, you can continue to save into the account and receive the 25% government bonus until your 50th birthday.

How much can you save?

You can save up to £4,000 each tax year. The government will then add a 25% bonus, giving you a maximum of £1,000 in free money each year.

This £4,000 contribution counts towards your overall annual ISA allowance, which is £20,000 for the 2025/26 tax year. For example, if you pay £4,000 into a LISA, you can still save up to £16,000 in other ISA accounts (such as a Stocks & Shares ISA) within the same tax year.


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How to use your Lifetime ISA to buy a home

To use your funds without paying the 25% withdrawal charge, you must meet a few key conditions:

  • The property must be your first home and located in the UK.
  • It must cost £450,000 or less.
  • You must have a mortgage to buy the property.
  • The LISA must have been open for at least 12 months from the date of your first deposit.

Your conveyancing solicitor must handle the withdrawal process. They will contact your LISA provider directly to request the funds. You should not withdraw the money yourself, as this will trigger the 25% penalty.

The property price cap is a strict limit. If the purchase price of the property is a single pound over £450,000, you will not be able to use your LISA, and any withdrawal will be subject to the 25% charge.



What does your Conveyancing Solicitor do?

Once your Conveyancing Solicitor receives your declaration, they will then complete their own statement, which confirms:

  • They are eligible to act for drawing down a Lifetime ISA.
  • A declaration that you’ve received the information from the investor and that you have no reason to believe it to be untrue or incomplete.
  • The purchase price of the property.
  • A declaration that the amount to be withdrawn will only be released towards covering the purchase price of the property.
  • Details of the Conveyancing Solicitor's Client Account where the Lifetime ISA will be sent to.
  • The Conveyancing Solicitor's unique professional body registration number (SRA or CLC).
  • A declaration that the information you’ve provided is true and complete to the best of your knowledge and belief.

Within 10 working days after completion, your Conveyancing Solicitor will email the Lifetime ISA Manager with the completion date, account number of the Lifetime ISA and the unique professional body registration number.



Is a Lifetime ISA worth it?

A Lifetime ISA is a powerful savings tool, but it's not without risks:

Benefits of a Lifetime ISA

The 25% Government Bonus: This is the biggest advantage. A bonus of up to £1,000 per year is a substantial amount of free money that can accelerate your savings timeline.

Tax-Free Savings: As with all ISAs, you pay no tax on the interest or investment growth of your savings.

Flexible Contributions: There is no minimum monthly contribution, so you can save at your own pace, as long as you do not exceed the £4,000 annual limit.

Risks & Considerations

The 25% Withdrawal Penalty: This is the main risk. If you withdraw your money for any reason other than buying a first home, for retirement at age 60, or for terminal illness, you will face a 25% charge on the withdrawal amount.

This means you will get back less than you originally put in. For this reason, you should only invest money into a LISA if you are sure you will be able to use it for an eligible purpose.

Property Price Cap: The strict £450,000 price cap can be a major disadvantage, especially in high-value areas of the country. If the home you want costs more than this, you will not be able to use your LISA funds without a penalty.

It May Lead to Poor Investment Choices: A recent Treasury Select Committee report raised concerns that the dual-purpose nature of the LISA may be leading some savers to make poor financial decisions.

The report, covered by the Guardian on 30 June 2025, highlighted that for some, a pension or other investment product may be more suitable, particularly if you're not a first-time buyer or are a lower-income earner. LISA funds can affect your eligibility for means-tested benefits.


This is where specialist advice is important. If you are a first-time buyer in England and Wales, you may also qualify for schemes like the New Build Boost, which can help you get on the property ladder without a large deposit.




Lifetime ISA vs. Other ISAs: Which one is right for you?

The Lifetime ISA is a specialist account, but it's not the only option for saving. The most common alternative is a standard Cash ISA. Here's a clear breakdown of the key differences to help you decide which account is best for your goals.

Feature
Lifetime ISA (LISA)
Cash ISA
Feature

Purpose

Lifetime ISA (LISA)

Saving for a first home or retirement (60+).

Cash ISA

General tax-free savings.

Feature

Eligibility

Lifetime ISA (LISA)

UK resident, aged 18-39 to open.

Cash ISA

UK resident, aged 18+.

Feature

Annual Contribution Limit

Lifetime ISA (LISA)

£4,000

Cash ISA

£20,000

Feature

Government Bonus

Lifetime ISA (LISA)

Yes, 25% contributions up to £1,000 per year.

Cash ISA

No.

Feature

Withdrawal Rules

Lifetime ISA (LISA)

Penalty-free for a first home or at age 60. Otherwise, a 25% charge applies.

Cash ISA

Typically no penalty for withdrawals, but some providers have notice periods.



Summary: If your only goal is to buy your first home or save for retirement, and you are eligible, the LISA is the most powerful tool because of the government bonus.

However, if you are unsure about buying a home or might need flexible access to your money for other purposes, a standard Cash ISA is a much safer option, as it does not come with the same withdrawal penalties.



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How to withdraw your Lifetime ISA funds

The process for withdrawing your Lifetime ISA funds is simple, but it must be done correctly to avoid the 25% penalty. You should never withdraw the funds yourself. Instead, the process must be handled by your conveyancing solicitor.

Step-by-step guide to withdrawing your LISA funds


  • 1Make an offer on a property. You can't begin the withdrawal process until your offer has been accepted.
  • 2Instruct your solicitor. Once you have a solicitor or conveyancer, let them know you will be using a Lifetime ISA to fund your deposit.
  • 3Your solicitor requests the funds. Your solicitor will prepare and submit the necessary forms to your LISA provider. They will request the money on your behalf.
  • 4Funds are transferred. The LISA provider will send the funds directly to your solicitor's bank account. This can take up to 30 days, so make sure you factor this into your timeline.
  • 5Purchase completes. Once the property sale is complete, your solicitor will use the funds to complete the purchase. They will also notify the LISA provider and HMRC that the funds have been used for an eligible purpose.


Our panel is experienced in the Lifetime ISA withdrawal process. We handle all the paperwork and communication with your provider to ensure a smooth, penalty-free transfer of funds.




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Andrew Boast of Sam Conveyancing
Written by:

Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.

Caragh Bailey, Digital Marketing Manager
Reviewed by:

Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.


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