UK Lifetime ISA vs Help to Buy ISA: Which Should You Choose?
Saving for your first home in the UK? The government wants to help — with a 25% bonus on your savings.
Two accounts have offered this bonus: the Help to Buy ISA and the Lifetime ISA (LISA). Understanding the differences helps you maximize your deposit.
The Quick Comparison
| Feature | Lifetime ISA | Help to Buy ISA |
|---|---|---|
| Still open? | Yes | No (closed Nov 2019) |
| Annual limit | £4,000 | £2,400 (£200/month) |
| Bonus | 25% (up to £1,000/year) | 25% (up to £3,000 total) |
| Property limit | £450,000 UK-wide | £250,000 (£450,000 London) |
| Age limit | 18-39 to open | Was 16+ |
| Bonus timing | Monthly/annual | At completion |
| Withdrawal penalty | 25% if not for home/retirement | None |
Lifetime ISA: The Current Option
If you’re starting fresh, the Lifetime ISA is your path to the 25% government bonus.
How It Works
- Open a LISA aged 18-39
- Deposit up to £4,000 per tax year
- Government adds 25% bonus (up to £1,000/year)
- Use for first home (up to £450,000) or retirement (after 60)
The Math
Lifetime ISA Savings Calculator
Enter your numbers above - results update automatically
Saving £4,000/year for 4 years:
- Your contributions: £16,000
- Government bonus: £4,000
- Total deposit fund: £20,000
That’s £4,000 of free money toward your home.
The Catch: Withdrawal Penalty
If you withdraw for anything other than your first home or retirement after 60, you pay a 25% penalty on the total withdrawal.
This penalty is harsh — you’d actually lose some of your original savings, not just the bonus.
Example: You’ve saved £4,000 + £1,000 bonus = £5,000 total. Withdraw early: 25% penalty = £1,250. You receive £3,750 — less than you put in.
Only open a LISA if you’re confident about using it for a home or retirement.
Help to Buy ISA: For Existing Holders
The Help to Buy ISA closed to new applicants in November 2019. If you already have one, here’s what you need to know.
Key Dates
- Saving deadline: November 2029
- Bonus claim deadline: November 2030
You can continue saving £200/month (plus any unused allowance) until 2029, then claim your bonus by 2030.
Bonus Limits
- Maximum contribution earning bonus: £12,000
- Maximum bonus: £3,000 (25% of £12,000)
Unlike the LISA’s ongoing annual bonus, the Help to Buy ISA has a lifetime cap of £3,000 government contribution.
Property Price Limits
This is where Help to Buy ISA falls short:
- Outside London: £250,000 maximum property price
- London: £450,000 maximum
With average UK house prices well above £250,000 in many areas, this limit excludes many first-time buyers.
The Timing Problem
The Help to Buy bonus isn’t paid until completion — you can’t use it for your deposit when exchanging contracts. You’ll need other funds for the deposit, then receive the bonus at completion.
LISA vs Help to Buy: Detailed Comparison
Maximum Savings After 5 Years
Annual Contribution Limits
LISA: £4,000/year (£333/month) Help to Buy ISA: £2,400/year (£200/month)
The LISA allows you to save faster and earn more bonus.
Property Price Flexibility
LISA: £450,000 anywhere in the UK Help to Buy ISA: £250,000 (or £450,000 in London only)
For most of England, the Help to Buy limit is too restrictive. The LISA’s £450,000 limit provides far more flexibility.
Bonus Availability
LISA: Bonus added monthly (or annually depending on provider), available for deposit Help to Buy ISA: Bonus paid at completion, not available for deposit
This is a crucial difference. With a LISA, your bonus can contribute to the deposit you offer when making an offer and exchanging contracts. With Help to Buy, you’re waiting until completion.
If You Have Both Accounts
You can hold both a Help to Buy ISA and a Lifetime ISA. However, you can only use the government bonus from one for your first home purchase.
The Strategy
- Maximize LISA contributions — Higher limits, bonus available for deposit
- Keep Help to Buy ISA as backup — Treat as regular savings
- Use LISA bonus at purchase — Usually the larger amount
- Withdraw Help to Buy without bonus — If needed for additional deposit funds
When you buy, inform your solicitor which account’s bonus you’re claiming. You’ll close the bonus claim on the other.
Opening a Lifetime ISA
Check eligibility
Must be 18-39 years old, UK resident, first-time buyer
Choose a provider
Cash LISA (savings account) or Stocks & Shares LISA (invested)
Open account before 40th birthday
Can continue contributing until 50
Set up regular contributions
Up to £333/month to maximize annual allowance
Monitor your bonus
Government adds 25% monthly or annually
Cash LISA vs Stocks & Shares LISA
Cash LISA:
- Savings account with interest
- Capital protected
- Best for buying within 5 years
Stocks & Shares LISA:
- Invested in funds
- Potential for higher growth (and losses)
- Best for longer timeframes (5+ years)
If you’re buying soon, stick with cash. If your home purchase is 5+ years away, consider stocks & shares for potential growth.
Popular LISA Providers
| Provider | Type | Notes |
|---|---|---|
| Moneybox | Both | App-based, easy transfers |
| AJ Bell | Stocks & Shares | Low fees |
| Hargreaves Lansdown | Stocks & Shares | Wide fund choice |
| Skipton | Cash | Building society |
| Nottingham BS | Cash | Competitive rates |
Compare current interest rates (cash) or fees (stocks & shares) before choosing.
Using Your LISA for a Home Purchase
When you’re ready to buy:
- Find a property under £450,000 — LISA limit
- Inform your solicitor — They’ll request funds from your LISA provider
- Provider releases funds + bonus — Paid directly to solicitor
- Funds used for deposit/completion — Bonus counts toward your deposit
The process takes 30+ days, so inform your provider early in the conveyancing process.
What If Your Plans Change?
Property Over £450,000
If you fall in love with a £475,000 home, you cannot use your LISA without the 25% penalty. Options:
- Accept the penalty (usually not worth it)
- Keep LISA for retirement instead
- Find a property under £450,000
Not Buying a Home
If you decide not to buy, your LISA can still be used penalty-free after age 60 for retirement. The bonus compounds for decades.
Buying Before LISA Matures
LISAs must be open for 12 months before you can use them for a home purchase. Open one early, even with minimal deposits, to start the clock.
The Bottom Line
If you’re starting fresh: Open a Lifetime ISA. It’s the only current option for the 25% government bonus, offers higher contribution limits than Help to Buy ISA did, and has a more practical £450,000 property limit.
If you have a Help to Buy ISA: Consider opening a LISA as well. Maximize the LISA, use its bonus for your purchase, and treat the Help to Buy as regular savings.
If you might not buy: Only use a LISA if you’re comfortable with the 25% withdrawal penalty or treating it as a retirement account. If uncertain, use a regular savings account instead.
The 25% government bonus is powerful — £4,000 becomes £5,000 with no effort beyond saving. For first-time buyers committed to purchasing under £450,000, the Lifetime ISA is one of the best savings tools available.
Frequently Asked Questions
Is the Help to Buy ISA still available?
No. The Help to Buy ISA closed to new applicants on 30 November 2019. However, existing account holders can continue saving until November 2029. If you don't have one, the Lifetime ISA is your option for government-bonused home savings.
What's the maximum property price for a Lifetime ISA?
You can use a Lifetime ISA for properties up to £450,000 anywhere in the UK. This is higher than the Help to Buy ISA limits, which varied by location (£250,000 outside London, £450,000 in London).
Can I have both a Help to Buy ISA and a Lifetime ISA?
Yes, you can hold both. However, you can only use the government bonus from ONE of them for your first home purchase. Most people with both should use the LISA bonus (usually larger) and keep the Help to Buy ISA as regular savings.
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