The Lifetime ISA (LISA) is one of the best financial tools available to under-40s in the UK. The government adds a 25% bonus on every pound you contribute — up to £1,000 free money per year. Whether you’re saving for a first home or building retirement wealth, this calculator shows exactly how much your LISA could be worth.
Lifetime ISA Basics
| Feature | Details |
|---|---|
| Age to open | 18–39 (must open before 40th birthday) |
| Age to contribute | Up to age 49 |
| Annual contribution limit | £4,000 |
| Government bonus | 25% of contributions (max £1,000/year) |
| Maximum annual bonus | £1,000 |
| Lifetime bonus cap | No cap (£1,000/year × years contributed) |
| Maximum annual total (contribution + bonus) | £5,000 |
| Counts toward ISA allowance | Yes (£4,000 of the £20,000 ISA allowance) |
| When you can withdraw (penalty-free) | First home purchase or age 60 |
| Withdrawal penalty (other withdrawals) | 25% of total amount |
Lifetime ISA Calculator — For First Home Savings
LISA growth with maximum £4,000/year contribution + £1,000 bonus = £5,000/year total:
Cash LISA (2.5% interest — typical 2026 rate)
| Years Saving | Total Contributions | Total Bonus | Interest Earned | LISA Balance |
|---|---|---|---|---|
| 1 | £4,000 | £1,000 | £125 | £5,125 |
| 2 | £8,000 | £2,000 | £378 | £10,378 |
| 3 | £12,000 | £3,000 | £766 | £15,766 |
| 4 | £16,000 | £4,000 | £1,291 | £21,291 |
| 5 | £20,000 | £5,000 | £1,960 | £26,960 |
Stocks & Shares LISA (7% average annual return)
| Years Saving | Total Contributions | Total Bonus | Investment Growth | LISA Balance |
|---|---|---|---|---|
| 5 | £20,000 | £5,000 | £7,236 | £32,236 |
| 10 | £40,000 | £10,000 | £29,543 | £79,543 |
| 15 | £60,000 | £15,000 | £78,556 | £153,556 |
| 20 | £80,000 | £20,000 | £173,040 | £273,040 |
Lifetime ISA Calculator — For Retirement
LISA retirement growth (opening at 18, contributing maximum until 49, withdrawing from 60):
| Age at Start | Years Contributing | Total Contributions | Total Bonus | LISA Value at 60 (7% return) |
|---|---|---|---|---|
| 18 | 32 years | £128,000 | £32,000 | £770,000 (est.) |
| 25 | 25 years | £100,000 | £25,000 | £475,000 (est.) |
| 30 | 20 years | £80,000 | £20,000 | £273,000 (est.) |
| 35 | 15 years | £60,000 | £15,000 | £154,000 (est.) |
| 39 | 11 years | £44,000 | £11,000 | £89,000 (est.) |
7% assumed annual return, compounded. All figures illustrative.
Impact of the 25% Bonus — Real Examples
The LISA bonus is the equivalent of basic rate tax relief on a pension (20%), but better — it’s 25%:
| Your Contribution | Government Adds | Total in LISA | Effective Return on Your Money |
|---|---|---|---|
| £1,000 | £250 | £1,250 | +25% instantly |
| £2,000 | £500 | £2,500 | +25% instantly |
| £4,000 (max) | £1,000 | £5,000 | +25% instantly |
| £4,000 × 10 years | £10,000 | £50,000 | +25% on contributions |
The 25% bonus beats the interest on any savings account immediately. Even in a cash LISA at 2.5% interest, the bonus alone is equivalent to 10 years of interest in year one.
LISA vs. Pension: Which Should You Choose?
| Scenario | Better Option | Reason |
|---|---|---|
| Employer offers workplace pension match | Pension first | 50–100% instant return from matching beats LISA 25% |
| Self-employed with no employer | LISA or pension are similar | Both give 25% effective boost at basic rate |
| Higher/additional rate taxpayer | Pension | Pension gives 40%–45% tax relief; LISA only 25% |
| Saving for first home under £450k | LISA | Only LISA provides bonus for property purchase |
| Saving for retirement + first home | Both | Max LISA for first home, pension for retirement |
| Age 40+ | Pension | Cannot open new LISA after age 39 |
LISA Withdrawal Penalty Explained
The 25% withdrawal penalty is deliberately punitive to discourage unauthorised withdrawals:
| Amount in LISA | Penalty (25%) | Amount Received | Loss vs. Your Contributions |
|---|---|---|---|
| £5,000 (£4k + £1k bonus) | £1,250 | £3,750 | −£250 |
| £10,000 | £2,500 | £7,500 | −£500 |
| £20,000 | £5,000 | £15,000 | −£1,000 |
| £50,000 | £12,500 | £37,500 | −£2,500 |
The penalty is designed so you lose not just the bonus but a small amount of your own contributions. Only use a LISA if you’re confident the funds will be used for a qualifying home purchase or kept until age 60.
How to Open a Lifetime ISA
- Choose a provider — options include AJ Bell, Hargreaves Lansdown, Nutmeg, Moneybox, and others
- Open before your 40th birthday
- For a stocks & shares LISA, choose an index fund (global tracker recommended)
- Contribute before 5 April each tax year — bonus is paid in monthly
- Track your LISA balance separately from your ISA allowance (LISA contributions count toward the £20,000 limit)
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