What is the Lifetime ISA property price limit?

The Lifetime ISA can only be used for a first property purchase priced at £450,000 or less. If your property costs more, you cannot use the LISA and will face a 25% withdrawal penalty on any withdrawals.

What is the real penalty for withdrawing from a LISA early?

The 25% withdrawal charge applies to the full balance (your contributions plus the government bonus). This means you effectively lose 6.25% of your own contributions — not just the bonus.

Is a LISA better than a Help to Buy ISA?

The Help to Buy ISA is closed to new applicants. For new savers, the LISA offers a higher annual contribution (£4,000 vs £200/month for HtB ISA) and a larger potential bonus (£1,000/year vs £3,000 lifetime). The property price cap is £450,000 for both.

G375 min read

LISA vs Help to Buy ISA: When the Government Bonus Actually Helps

lifetime ISA calculator UKLISA vs help to buy ISAlifetime ISA property purchase bonusfirst time buyer government bonus 2025LISA withdrawal penalty how it works

The Lifetime ISA (LISA) and its predecessor the Help to Buy ISA both offer a 25% government bonus on savings for a first home. The Help to Buy ISA closed to new applicants in 2019 (existing accounts run until 2030), so the LISA is the current option. The bonus sounds straightforward — but the withdrawal penalty structure can make it punishing if circumstances change.

LISA at a Glance (2025/26)

Feature	Detail
Annual contribution limit	£4,000
Government bonus	25% (max £1,000/year)
Eligibility age	18–39 (open by 39th birthday)
Property price cap	£450,000
Earliest property use	12 months after first contribution
Withdrawal penalty (non-qualifying)	25% of withdrawal amount
Effective penalty on contributions	6.25% of your own money

The 25% Penalty Explained

The penalty appears to be 25%, but it's applied to the total (contributions + bonus), which means:

You put in: £4,000
Bonus added: £1,000
Total: £5,000

Penalty (25% of £5,000): £1,250

You receive: £5,000 − £1,250 = £3,750
You lose: £250 of your own contributions (6.25% effective penalty)

What-If Scenarios

Scenario 1: Maximum LISA benefit over 5 years

Open at 25, contribute £4,000/year for 5 years before buying:

Item	Amount
Total contributions	£20,000
Government bonuses received	£5,000
Growth (est. 4% stocks & shares)	~£5,400
Total available for deposit	~£30,400

Scenario 2: Property over £450,000 — LISA becomes unusable

In London and the South East, many first-time buyers target properties above £450,000. The LISA cannot be used for these purchases. You'd face the 25% withdrawal penalty — or leave the money locked until age 60. Consider a Stocks & Shares ISA instead for flexibility.

Scenario 3: Buying within 12 months

The LISA requires 12 months to pass after the first contribution before it can be used for a property purchase. If you're planning to buy within a year, the bonus is inaccessible in time — a regular cash ISA or savings account may be more practical.

Frequently Asked Questions

→ Model your savings growth with the Savings Calculator

Indicative only. LISA rules, bonuses, and penalties may change. Always check HMRC guidance before opening a LISA for property purchase.

Attribution and Review

Published by the Plain Figures editorial team. Review focuses on whether the formula, assumptions, and date-sensitive references still match what the page claims to calculate.

Methodology Authors and Review Editorial Policy

This guide is for general information only. Plain Figures does not provide financial advice.