Lifetime ISAs allow you to collect free money from the government to spend either on buying your first home or funding your retirement. But they're only available for these specific purposes and there are certain age stipulations.
The Financial Services Compensation Scheme (FSCS) guarantees that it will step in to compensate the first £120,000 you have saved with a UK-authorised bank, building society or credit union in the event that the business goes bust.
We currently don't have that product, but here are others to consider:
How we picked these
Sign up to receive the latest deals, tips and a chance to win £400! (T&Cs)
Error placeholder Click here to sign in
ISAs (individual savings accounts) are savings accounts that allow you to avoid paying tax on the interest you earn. Across all ISA accounts you have, you’re able to save up to £20,000 in each tax year without paying any tax on your profits (correct for the 2025/2026 tax year). Lifetime ISAs are a type of ISA that’s specifically designed to save for your first home or retirement.
If you decide to put money in a LISA, you earn from your savings in 2 ways:
A LISA gives you good value for your money – but only if you’re prepared to use your saved money for your retirement or your first house. There are some added caveats mentioned below.
A lifetime ISA follows many of the same rules as traditional ISAs, meaning you’ll pay no tax on interest earned, and the amount you can deposit per tax year is capped. However, rather than paying in up to £20,000 into your ISA each year, you can deposit a maximum of £4,000 per year in a lifetime ISA.
On top of the interest paid, you’ll also earn a 25% bonus from the government on the amount you deposit each tax year. This bonus is available every year until you turn 50.
But there’s a catch: The money can only be withdrawn after a minimum of 12 months of opening the account to help pay for your first property (worth up to £450,000) or after you turn 60 years old if you intend to use it for your retirement. If you decide to withdraw it in any other circumstances, you’ll face a 25% penalty. (This penalty was reduced temporarily to 20% between 5 March 2020 and 5 April 2021, in response to the COVID-19 pandemic).
The 25% withdrawal penalty means that, if you wanted to withdraw all the money saved in a lifetime ISA, you would end up with less money than you deposited. For example, if you deposited £800 in a tax year (and received the £200 government bonus) you would only receive back £750 after the government takes 25% of the £1,000 total.
Lifetime ISAs are available as cash ISAs or stocks and shares ISAs. You must be aged between 18 and 39 to open one.
The most important factor to consider when searching for a lifetime ISA is the interest rate paid. You can find the best interest rates by searching for lifetime ISAs on any price comparison website.
Customer service ratings might be of interest to you, but for most savers, this pales in comparison compared to the interest rates on offer.
Our best lifetime ISAs are the highest interest rates available. To get the latest rates, we use Defaqto data, which covers nearly the full market of savings products and is checked and updated daily. We don’t include accounts from private banks.
All the lifetime ISAs in our list have savings protection – for most, this is the Financial Services Compensation Scheme (FSCS). Other schemes include that of NS&I, which is 100% backed by HM Treasury, and the Gibraltar Deposit Guarantee Scheme.
You’re not forbidden from having more than one Lifetime ISA, but you cannot pay money into more than one of them in a single tax year.
If you’d rather have one Lifetime ISA for retirement and another one to buy your first house, you can do that, but you’ll have to pay into them in alternate years. Also, the £4,000 yearly limit is a strict one you won’t be able to bypass.
As with most financial products, it really depends. A free 25% boost to your savings is not to be brushed off, but equally, don’t let the mirage of easy cash blind you.
LISAs are viable options both for buying a house and for saving for retirement, but in some cases, they aren’t the best option for either.
For example, have you considered increasing your pension contributions? When you put money into your pension, you get tax relief on it – it’ll be worth at least 20% and even more if you’re a high-rate taxpayer. Since the money you put in your LISA has been taxed at the source (when your salary was paid to you), and you cannot get more than the 25% back, pensions can ultimately turn out more rewarding.
Moreover, if you need to claim government benefits, for example because you find yourself unemployed, you may need to withdraw your LISA before becoming eligible to do so, but pensions don’t count – and the same is usually true for bankruptcy cases.
LISAs are a smart choice, but you must really be confident that you won’t need the money you put aside any time soon. If you withdraw it in advance, the bill will be depressingly expensive.
| Rates up to | 4.75% AER |
|---|---|
| Number of accounts | 16 |
| Minimum investment | £0.01 |
| Maximum investment | £1,000,000 |
| Opening options | Branch, website, mobile app |
The government bonus on offer with lifetime ISAs is very generous, but you should be extremely sure you want to open one before you do. Withdrawals can only be made to buy your first home or fund your retirement, unless you’re willing to face a 25% fine.
Find out more about the different types of savings accounts on offer.
Want to cash in your NS&I premium bonds? Our simple guide explains how to do this online, by phone or through the post.
Find out if OneFamily can provide you and your family with the right savings products.
Find out more about the specialised financial services provider, Aldermore, and decide if their cash ISAs, fixed rate bonds or other savings accounts are right for you.
Find out more about Leeds Building Society, and see if their savings accounts are right for you and your savings plan.
Find out more about the breakdown specialists, and see if they can provide you with the right savings account.
Read about the Post Office and the savings accounts they offer. Find out more about the services Post Office Money provide, and see if they are right for you.
RCI Bank offers competitive rates to people and businesses.
The fast pace of the UK banking market forces so-called ‘big banks’ like NatWest to stay ahead of the curve. By constantly refining the user experience with improvements to online banking and mobile apps, NatWest remains one of the UK’s most popular banks.
A cash ISA is a savings account where you never pay tax on the interest. Use our comparison table to find the best ISA rates – whether you want to lock cash in for a set time or keep it easy access.