Lifetime ISA (LISA) Calculator

What does the calculator do?

This calculator is great for estimating what your Lifetime ISA could be worth and helping you stay on track with your savings goals. However, it does not take into account fees or market ups and downs.

You can’t do anything about market ups and downs, but fees are in your control and are really important—they hurt your returns. Fees vary wildly between platforms, so make sure you check our Lifetime ISA recommendations here.

The Lifetime ISA (LISA) is a kind of tax-free savings account that you can save into to either buy your first home or spend in retirement.

You can pay in £4,000 a year, and this forms part of your annual £20,000 ISA allowance. The government then pays you a 25% tax-free bonus.

Download our free Lifetime ISA guide for more information.

The main benefit is that the government tops up your contributions with a bonus, up to a maximum bonus of £1,000 per year. This bonus does not count towards your annual ISA limit.

If you saved for five years using this account, you would save up £20,000 of your own money, plus a £5,000 bonus from the government, giving you £25,000 in total.

You could then put this towards your first home, or continue saving into it to withdraw in retirement.

If you and a partner buy a house together, you can also both save into a LISA and both put your LISA towards the home, meaning you can both cash in on the government bonus.

If you decide to use your LISA in retirement, you can make a full or partial withdrawal when you turn 60. You may be able to leave some in the account, where it will continue to grow tax-free – check with your LISA provider.

Penalties

There are a couple of ‘catches’ with the LISA that are important to understand before you pile your money into an account, though.

For one, you can only use the money to buy your first home or to put towards your retirement. If you want to withdraw the money for any other reason, be prepared to pay a penalty.

The penalty is 25% – but don’t be caught out. This isn’t just reversing the government’s 25% bonus – it’s a 25% penalty on the entire amount, bonus included.

For example: If you put £4,000 into your account and received the government bonus of £1,000, the government would have given you a 25% top-up on £4,000, boosting your pot to £5,000.

But, if you withdrew that money, you would pay 25% on the whole £5,000. That’s £1,250 – meaning you would be losing £250 of your own money.

If there is any chance you might want to take the money back out for any reasons other than for purchasing a first home or spending in retirement, this isn’t the account for you.

House restrictions

Another catch is that there is a cap on how much your first home can cost if you want to use a LISA to fund it. Currently, your first home must cost £450,000 or less.

If you want to buy a first home worth more than this, you cannot use your LISA money to put towards your deposit.

The house also needs to be a home you plan to live in, and it must be the first home you have ever owned. So, no investment properties, and no second purchases.

Tax-free status

Also! It’s worth noting that if you leave your LISA funds to a loved one when you die, the money will lose its tax-free ISA status and will form part of your estate, so remember to factor that in for any inheritance planning.

If you are saving for retirement, you could consider opening a personal pension or self invested personal pension (SIPP) instead. 

These accounts benefit from a similar government top up, but you can put a much higher amount of money in each year. Read our top picks for SIPPs here.

Anyone saving for a home who may need to withdraw their cash could consider saving into an easy-access cash ISA, which allow you to take your money out at short notice.

If you are planning to save over the longer-term, you could consider a stocks and shares ISA. The stock market has historically outperformed cash over the long term. We have ranked our favourite stocks and shares ISA providers here.