Lifetime ISA Savings: How the Bonus Adds Up
Updated:
A Lifetime ISA bonus is 25% of what is paid in, up to £1,000 a year on payments of up to £4,000, for the 2026-27 tax year. This guide shows how that adds up over several years with assumed figures. The examples are arithmetic, not forecasts, and they leave out interest and investment growth.
The site's rules data was last checked against gov.uk on 26 September 2026. Figures typed in this guide may not yet reflect a later change, and the descriptions of gov.uk pages are summaries that may also lag. The current figures are on the ISA rules at a glance page. General information only, not financial advice.
How does the Lifetime ISA bonus work?
gov.uk says you can put in up to £4,000 each year until you are 50, and that the government adds a 25% bonus to your savings, up to a maximum of £1,000 per year. The limit counts towards the annual ISA limit of £20,000 for the 2026-27 tax year. The source is the GOV.UK Lifetime ISA overview.
gov.uk says you must be 18 or over but under 40 to open a Lifetime ISA (who can open a Lifetime ISA), so the opening window runs from 18 to 39. Payments and the bonus can continue until 50. The pages read for this guide do not say how often the bonus is credited, so the timing is a question for each provider.
How do payments and the bonus add up?
The arithmetic is simple: the bonus is 25% of the amount paid in. Take an assumed saver paying £180 a month, which is £2,160 a year. The bonus is 25% of £2,160, or £540 a year.
| Year | Paid in so far | Bonus so far | Total before interest or growth |
|---|---|---|---|
| 1 | £2,160 | £540 | £2,700 |
| 2 | £4,320 | £1,080 | £5,400 |
| 3 | £6,480 | £1,620 | £8,100 |
| 4 | £8,640 | £2,160 | £10,800 |
| 5 | £10,800 | £2,700 | £13,500 |
Interest or investment returns would come on top, and are not shown. If the money were in a stocks and shares Lifetime ISA, growth could be negative as well as positive. The Lifetime ISA calculator can run other amounts, and its results are illustrations, not forecasts.
What is the difference between a cash and a stocks and shares Lifetime ISA?
gov.uk says a Lifetime ISA can hold cash or stocks and shares, or a combination of both. A cash version earns interest at a rate set by the provider, and the rate can change. A stocks and shares version invests in markets, so the value can go up or down and the bonus does not protect against a fall. The pages read do not say whether a given account is covered by the FSCS, so ask the provider or FSCS. For a fuller comparison, see Lifetime ISA investment options.
What can the money be used for?
gov.uk lists three situations where money can be withdrawn without the withdrawal charge: buying a first home, being 60 or over, and being terminally ill with less than 12 months to live. For a first home, gov.uk says the property must cost £450,000 or less, the purchase must be at least 12 months after the first payment, and the buyer must be buying with a mortgage. The source is withdrawing money from your Lifetime ISA.
What does a withdrawal charge do to the totals?
gov.uk says any other withdrawal attracts a 25% charge, and that if the whole pot is withdrawn the charge applies to the total amount in the ISA, including the government bonus. Using the year 3 row above, with assumed figures:
- Total in the account: £8,100 (£6,480 paid in plus £1,620 bonus).
- Charge of 25% on £8,100: £2,025.
- Amount received: £8,100 less £2,025 = £6,075.
- Compared with the £6,480 paid in, that is £405 less.
For part withdrawals, gov.uk says you must take out extra to cover the charge. Its own example is that taking out £160 leaves £120 after a £40 charge. A withdrawal charge can therefore mean getting back less than was paid in.
How does a Lifetime ISA fit with other ISAs?
Lifetime ISA payments count towards the £20,000 allowance, so they use part of the allowance that cash and stocks and shares ISAs also draw on. gov.uk says you can only pay into one Lifetime ISA in a tax year (how ISAs work). The ISA Contribution Split Planner shows how different splits could work, and the ISA Allowance Checker shows how much of the allowance is left. For the comparison with an investment ISA, see Lifetime ISA vs stocks and shares ISA. To model several accounts over several years, the Advanced ISA Planner shows illustrations.
What to check
- How much of the £4,000 limit a payment plan would use in a tax year, and how that fits with other ISA payments.
- When the provider credits the bonus.
- Whether the account is cash or stocks and shares, and the risk that goes with each.
- Whether the property would be within the £450,000 limit if the money is meant for a home.
- What a withdrawal outside the charge-free reasons would cost (see the example above).
Frequently asked questions
How is the Lifetime ISA bonus calculated?
The bonus is 25% of what is paid in, up to a maximum of £1,000 per year, according to gov.uk. On £2,160 paid in over a year, the bonus is £540.
How do I work out what a Lifetime ISA could be worth?
Add the money paid in to the bonus, then add any interest or investment growth. The table above does the first two steps with assumed payments, and the Lifetime ISA calculator can run other amounts as illustrations, not forecasts.
Does it matter when in the tax year I pay into a Lifetime ISA?
The pages read for this guide do not say when the bonus is credited. The limit applies to each tax year, so a provider can say how the timing of a payment affects when the bonus appears.
This guide does not constitute financial advice. Your personal situation, tax position, and savings goals may mean different strategies are appropriate. Consider speaking to a regulated financial adviser if you are uncertain.
