The short version
- A Lifetime ISA (LISA) is for people who open it aged 18 to 39, saving for a first home or for later life. You can pay in up to £4,000 a year until 50, and the government adds 25%.
- Take money out for any other reason before 60 and you pay a 25% charge, which takes back more than the bonus gave you.
- The government plans to replace the LISA with a First Time Buyer ISA. As of 13 October 2026 it hasn't published its decision, and you can still open and pay into a LISA.
- A Junior ISA is for under-18s. Up to £9,000 a year can go in (2026/27), the money belongs to the child, and they can take it out at 18.
Part of Getting started. For the whole process in order, see how to buy your first ETF, step by step.
- £4,000most you can pay into a Lifetime ISA a year, within your £20,000 ISA allowance (2026/27)
- 25%government bonus on Lifetime ISA payments, up to £1,000 a year
- £9,000Junior ISA limit per child, 2026/27
How a Lifetime ISA works
A Lifetime ISA is an ISA with a government bonus attached. To open one you must be 18 or over but under 40, and resident in the UK. Crown servants and members of the armed forces living abroad, and their spouses or civil partners, can open one too.
- How much: up to £4,000 a year, until you’re 50. It counts towards your overall ISA allowance, which is £20,000 for 2026/27. Put £4,000 in a LISA and you have £16,000 left for other ISAs.
- The bonus: the government adds 25% of what you pay in, up to £1,000 a year. Pay in £4,000 and you get £1,000.
- One a year: you can pay into only one Lifetime ISA in each tax year.
- At 50: you can’t pay in or earn the bonus any more, but the account stays open and keeps its interest or investment returns.
Like any ISA, there’s no tax on the interest, income or gains inside it.
What you can use it for
According to GOV.UK, you can take money out without a charge if:
- You’re buying your first home, the property costs £450,000 or less, you buy at least 12 months after your first payment in, you use a conveyancer or solicitor, and you’re buying with a mortgage. Two first-time buyers can each use their own LISA for the same home.
- You’re 60 or over. From then, the money is yours to use for anything.
- You’re terminally ill, with less than 12 months to live.
If you die, there’s no charge on taking the money out of your account. The £450,000 cap is the same across the whole UK.
If you already own a home, paying off a mortgage or investing is a different question, with its own guide.
The withdrawal charge, and why it costs more than the bonus
Take money out for any other reason, or transfer it to another type of ISA, before 60 and you pay a 25% withdrawal charge.
That sounds as if it simply takes the bonus back. It takes more. GOV.UK’s own example: you pay in £800, the bonus adds £200, and you have £1,000. The charge is 25% of £1,000, which is £250, leaving you £750. You’ve lost £50 of your own money, about 6% of what you paid in.
The reason is that the bonus is 25% of what you pay in, but the charge is 25% of what you take out, bonus included. If your ETFs have fallen in value as well, you could get back a lot less than you put in.
This catches a lot of people. The Treasury’s 2026 consultation says more LISA holders have lost part of their original savings than have used one to buy a house. By 2024/25, 314,600 savers had used a LISA to buy a first home.
The plan to replace the Lifetime ISA
HM Treasury ran a consultation on a new First Time Buyer ISA from 22 June to 18 August 2026. It says the new account “will be offered in place of the Lifetime ISA” once it’s available. As of 13 October 2026, GOV.UK says the government is analysing the feedback and hasn’t published its response.
What it proposes:
- An account only for buying a first home, open to anyone 18 or over, with no upper age limit.
- A government bonus paid when you withdraw to buy, so no withdrawal charge. Take money out for something else and you simply don’t get the bonus.
- The aim is to offer both cash and stocks and shares versions.
- The yearly limit, property price cap and bonus rate are still to be announced at a future fiscal event.
And for existing LISAs:
- Until the new account arrives, you can still open a LISA. Holders can keep paying in under the current rules indefinitely.
- You won’t be able to transfer a LISA into the new account, but you could use both towards the same purchase. You could hold both but pay into only one in a tax year.
- Whatever price cap is chosen, the new account’s and the LISA’s will be aligned.
None of this is final until the government responds.
How a Junior ISA works
A Junior ISA is a tax-free account for a child who is under 18 and lives in the UK. A parent or guardian with parental responsibility opens it, although 16- and 17-year-olds can open their own.
- Limit: £9,000 per child in 2026/27, across all their Junior ISAs. Anyone can pay in, as long as the total stays within that.
- Ownership: the money belongs to the child. Parents or guardians manage the account.
- Access: the child can take control of the account at 16 but can’t withdraw until 18. At 18 it automatically becomes an adult ISA.
- Exceptions: money can come out early if the child is terminally ill.
- Child Trust Funds: a child can’t have both at once, but money can be transferred from a Child Trust Fund into a Junior ISA.
The 18th birthday is the catch. Whatever is in the account then is theirs to spend, on university or on anything else.
Cash or stocks and shares?
Both accounts come in cash and stocks and shares versions. You can hold cash, investments or a mix in a LISA, and a child can have a cash Junior ISA, a stocks and shares one, or both. ETFs go in the stocks and shares versions.
The choice mostly turns on time. Between 1871 and 2020, UK shares fell in value in about one year in four. Over ten-year periods they never ended lower in pounds, though about one in eight left investors poorer after inflation. Will I lose money? has the details.
The questions worth asking:
- When will the money be needed? A house deposit needed in two years could be hit by a fall at the wrong moment. Money for age 60, or for a baby’s 18th birthday, has longer to recover.
- Could you need it before 60 for something else? If so, the LISA charge matters. An ordinary stocks and shares ISA or cash ISA has no penalty.
- For retirement, would a pension suit you better? Basic-rate pension relief works out the same as the bonus: £80 becomes £100. Higher-rate taxpayers can claim more, and an employer may add to a workplace pension. But most of a pension is taxed when it comes out, while LISA money after 60 isn’t. The Treasury itself says the LISA may be diverting people from pensions that could suit them better. ETFs in a SIPP explains the pension rules.
For help weighing these up, MoneyHelper offers free guidance, and a regulated financial adviser can give personal advice. You can check an adviser on the FCA register.
Common questions
- Can I have a Lifetime ISA and a stocks and shares ISA?
- Yes. In 2026/27 you can pay up to £4,000 into the LISA, as long as everything you put into ISAs that year stays within £20,000.
- I’m 40. Is it too late?
- To open one, yes. If you opened a LISA before 40, you can keep paying in until you’re 50.
- Is the Lifetime ISA closing?
- Not yet. The government plans to offer a First Time Buyer ISA in its place. Until then, you can still open and pay into a LISA.
- Does the April 2027 cash ISA change affect the LISA?
- No. The LISA limit stays at £4,000 a year within the £20,000 allowance. The cash ISA guide explains the change.
- Can grandparents pay into a Junior ISA?
- Anyone can pay in, as long as the child’s total stays within £9,000 in 2026/27.
This page explains how Lifetime ISAs and Junior ISAs work. It isn't advice about what you should do. Rules can change, and the government's plans for the Lifetime ISA aren't final. Investments can fall as well as rise, and you may get back less than you put in. For free, impartial guidance, try MoneyHelper. Read the full disclaimer.
Sources
- Lifetime ISA, GOV.UK
- Lifetime ISA: who can open one, GOV.UK
- Lifetime ISA: withdrawing money, GOV.UK
- Individual Savings Accounts (ISAs), GOV.UK
- First Time Buyer ISA consultation, HM Treasury, 22 June to 18 August 2026
- First Time Buyer ISA: consultation document, HM Treasury, 2026
- Junior Individual Savings Accounts (ISA), GOV.UK
- Tax on your private pension contributions: tax relief, GOV.UK
- Macrohistory Database, release 6, Jordà, Schularick and Taylor: UK returns 1871–2020, analysed in Will I lose money?
- Financial Services Register, Financial Conduct Authority
Facts checked 13 October 2026.