Lifetime ISA 2026: Is It Still Worth It for First-Time Buyers?

You can open a LISA if you're between 18 and 39. You can save up to £4,000 per year (within your £20,000 annual ISA allowance), and the government tops it up by 25% — so £4,000 becomes £5,000. You can use it for: buying your first home (property must cost £450,000 or less), or retirement (withdrawing after age 60). That's it. Any other withdrawal incurs a 25% penalty on the entire withdrawal — which means you effectively lose money, not just the bonus.

The 25% withdrawal penalty applies to the total amount withdrawn, not just the bonus. So if you save £4,000 and receive a £1,000 bonus, your pot is £5,000. If you withdraw it for a non-qualifying reason, you pay 25% of £5,000 = £1,250. You get back £3,750 — less than the £4,000 you put in. This penalty was temporarily reduced to 20% during COVID but returned to 25% in April 2021. It remains controversial, and there have been calls to reform it.

Help to Buy ISAs are closed to new applicants (closed December 2019) but existing account holders can still use them until 2030. If you have both: use your LISA for larger deposits and higher property values (up to £450k), and the H2B for smaller purchases. You can't use both government bonuses on the same property purchase. The LISA bonus is better if you're disciplined — the Help to Buy bonus is only paid at completion, while LISA funds (including bonus) can count toward your deposit exchange.