UK Lifetime ISA Calculator
Model your Lifetime ISA end-to-end: the £1,000/year government bonus, growth to your first-home purchase or age 60, and — the bit most tools skip — exactly how much the 25% early-withdrawal penalty costs if you change plans.
How the Lifetime ISA actually works
The Lifetime ISA is arguably the most generous savings product the UK government has ever offered — but only if you use it for exactly the two things it was designed for: a first home or retirement at 60. Miss either target and it becomes actively worse than a regular Stocks & Shares ISA. This calculator makes that trade-off explicit.
1. The bonus is a straight 25% top-up
Every month you contribute, the government pays 25% on top, capped at £1,000 per tax year (i.e. on a £4,000 contribution). Contribute £333.33/month for a full tax year and you get the full £1,000 bonus. That bonus is paid straight into your LISA and starts earning growth alongside your own money — a real compound advantage over decades.
2. The lifetime maximum is £32,000 of pure bonus
Open at 18, max out every year to 50, and you'll have contributed £128,000 and received £32,000 in bonuses — plus decades of investment growth on both. On a 5% real return over 32 years that's a pot of around £340,000, of which roughly £180,000 is compound growth.
3. First-home withdrawals are penalty-free
The LISA is genuinely brilliant for a first home if the property costs £450,000 or less. You must have held the LISA for at least 12 months, be buying a residential home to live in (not buy-to-let), and be a first-time buyer. Withdraw the entire pot, keep every penny of the bonus, and use it as deposit + fees.
4. Retirement withdrawals are 100% tax-free from age 60
Once you hit 60 you can withdraw the entire LISA — bonus, contributions, growth — with zero income tax due, ever. This is where LISA quietly beats even a SIPP for basic-rate taxpayers: a SIPP would tax 75% of withdrawals as income; a LISA taxes nothing.
5. The 25% penalty is the trap
Any other withdrawal — job change, moved abroad, needed cash — triggers a 25% penalty on the amount withdrawn. Because the penalty is applied to your pot (which includes the bonus), you end up ~6.25% worse off than if you'd used a regular ISA. On £5,000 saved plus £1,250 bonus, the penalty is £1,562.50, leaving you with £4,687.50 — £312.50 less than you started with.
Worked example — first home at year 5
£333/month × 60 months = £19,980 contributed. Bonus over 5 years = £4,995. Assuming 5% growth on average balance, your pot at year 5 is around £27,900. That's £7,900 more than you put in — a mix of £4,995 government cash and roughly £2,900 in investment growth. On a £250,000 first home this covers a 10% deposit plus fees comfortably. If you'd used a regular Cash ISA at 4% instead you'd have around £22,000 — the LISA delivered a real, hand-you-cash advantage of nearly £6,000.
Frequently asked questions
How much government bonus does a Lifetime ISA pay?
The government pays 25% on top of whatever you put in, up to £1,000 per tax year — meaning you'd need to contribute the full £4,000 annual limit to earn the maximum £1,000 bonus. The bonus is paid monthly straight into your LISA, usually 4–9 weeks after each contribution. Contributions above £4,000 count towards your overall £20,000 ISA allowance for the year but don't attract any bonus.
Who can open a Lifetime ISA?
You must be a UK resident aged 18–39 to open a LISA. Once opened, you can keep contributing until you turn 50. That means the maximum lifetime bonus is £32,000 (£1,000/year × 32 years, if you open at 18 and max out every year to 50). You can hold both a Cash LISA and a Stocks & Shares LISA — either type earns the same bonus.
What can I use the LISA for without penalty?
Two things only — a first home worth up to £450,000 (anywhere in the UK, including London), or retirement from age 60. Any other withdrawal triggers a 25% penalty on the amount withdrawn. Because the bonus is 25% but the penalty is 25% of a larger amount, it doesn't just take back the bonus — it actually clips your original contribution too.
How does the 25% penalty actually leave me worse off?
This is the LISA's big trap. You put in £1,000. Government adds £250. You now have £1,250. Withdraw early → 25% penalty on the £1,250 = £312.50. You get back £937.50. So you're £62.50 worse off than if you'd never touched the LISA. On percentage terms it's a ~6.25% loss on your own money. The calculator models this exactly.
Is a LISA better than a SIPP for retirement?
For basic-rate taxpayers: LISA and SIPP give the same 25% uplift on the way in. LISA wins on the way out because 100% is tax-free at 60, vs SIPP giving 25% tax-free and taxing 75%. For higher-rate taxpayers: SIPP wins — you get 40% relief in, only ~15% effective tax out. Rule of thumb: LISA for basic-rate now expecting basic-rate later, SIPP for higher-rate now expecting basic-rate later.
Can I use a LISA for a house AND get the bonus?
Yes — that's the sweet spot. You must have held the LISA for at least 12 months before withdrawing, be a first-time buyer, and buy a property up to £450,000 with a residential mortgage. Withdrawal in this scenario has zero penalty and you keep every penny of the bonus. If you save the £4,000 max for 5 years you'd have around £25,000 including bonuses and ~7% growth — enough for a real 10% deposit on a £250k property.
What if house prices go up above £450k?
That's the LISA's biggest ongoing risk. The £450k cap has been frozen since LISAs launched in 2017 despite average London house prices roughly doubling. If prices push the home you want above £450k, using LISA funds triggers the penalty — you're forced into retirement-only use, or eat the ~6.25% penalty. HMRC has hinted at raising the cap but nothing is confirmed for 2024/25.
Not financial advice. LISA rules, contribution limits, and bonus amounts are set by HMRC. Investment returns are illustrative only. Always check current rules at gov.uk/lifetime-isa before making decisions. Property price caps and penalty rules can change at Budget.
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