Lifetime ISA on a home over £450,000: what does 20% cost?
The charge fell from 25% on 29 October 2026. What a buyer keeps, and what it means for sellers.
A Lifetime ISA used on a first home over £450,000 is charged 20%, not 25%. Selling? open for offer lets you test the market before you list. In force since 29 October 2026; with no growth, savers keep their money.
Last reviewed 3 November 2026. Status: In force from 29 October 2026, under the Individual Savings Account (Amendment) (No. 3) Regulations 2026.
What is a Lifetime ISA?
A savings account for a first home or later life. You open it between 18 and 39 and can pay in up to £4,000 a year until 50. It can hold cash, stocks and shares, or both.
That £4,000 counts towards the overall ISA limit, which is £20,000 for 2026 to 2027.
What changed on 29 October 2026?
A Lifetime ISA adds a 25% government bonus to savings, up to £1,000 a year. With no withdrawal charge, the money can go towards a first home costing £450,000 or less.
Buying above £450,000 used to mean an unauthorised withdrawal, charged at 25%. For withdrawals since 29 October 2026, a purchase that meets every other rule is charged 20% instead.
Other withdrawals are unchanged. Taking money out for any other reason before age 60 still costs 25%.
What does 20% cost in pounds?
GOV.UK's own example: £800 saved earns a £200 bonus, making £1,000. At 25%, the charge is £250 and £750 comes back. At 20%, our arithmetic gives a £200 charge and £800 back.
| Withdrawal | Charge | You receive |
|---|---|---|
| First home of £450,000 or less | None | £1,000 |
| First home over £450,000 | £200 | £800 |
| Any other reason (unauthorised) | £250 | £750 |
At 20%, the charge takes back the bonus and nothing more, when there is no growth. The Budget describes this as protecting "the value of individual contributions".
The 25% charge does more than recover the bonus. On GOV.UK's example it leaves £750 from £800 paid in.
With growth, the charge also takes 20% of the gains. With a loss, you can get back less than you paid in.
What rules still apply?
- You must be a first-time buyer.
- You must buy at least 12 months after your first payment in.
- A conveyancer or solicitor must act for you; the provider pays them.
- You must buy with a mortgage.
Two buyers can each use their own Lifetime ISA and bonus on the same home, if both are first-time buyers and both meet these rules.
A private mortgage from a close relative, a spouse or a civil partner rules the Lifetime ISA out. GOV.UK lists the relatives covered, including parents, grandparents and siblings.
A buyer with a Help to Buy ISA as well can use the government bonus from only one of the two. Moving money from a Lifetime ISA into a Help to Buy ISA costs the 25% charge.
If the purchase falls through and the money goes back to the provider, the regulations require the 20% charge to be restored to the account.
This explains how the charge works. It is not advice on whether to use your Lifetime ISA; a regulated financial adviser can give that.
What comes after the Lifetime ISA?
Budget 2026 announced a First Time Buyer ISA from April 2029, replacing the Lifetime ISA for new savers. Status: Announced in Budget 2026, 28 October 2026; not yet law.
The Budget says it would keep the 25% bonus for homes up to £450,000, with the bonus capped at £20,000. Existing Lifetime ISA holders can carry on under the current rules.
The Budget says the new account would have no upper age restriction, unlike the Lifetime ISA, which must be opened before 40.
What does it mean if you are selling?
Before 29 October, a first-time buyer with a Lifetime ISA faced a 25% charge on a home just over £450,000. That charge is now 20%.
For a buyer who has saved the maximum £4,000 a year, the bonus is up to £1,000 a year. On a home over the line, that bonus is what the 20% charge takes back, if there is no growth.
The £450,000 line still matters, because below it the bonus is kept in full. Our piece on pricing near £500,000 looks at the stamp duty line nearby.
open for offer is the pre-market, the market that exists before a property is ever advertised. If your home could sit near either line, a market estimate shows where it falls.
Sources and corrections
Sources, checked 3 November 2026: GOV.UK Lifetime ISA guide (last updated 8 November 2024) and the Individual Savings Account (Amendment) (No. 3) Regulations 2026.
Also the Budget 2026 document, published 28 October 2026.
Contains public sector information licensed under the Open Government Licence v3.0.
Corrections: none so far. If we find an error, we will correct it here, with the date and the figure we changed.
Common questions
Can I use a Lifetime ISA on a house over £450,000?
Yes, since 29 October 2026, if the purchase meets the other first-home rules. A 20% withdrawal charge applies, instead of the 25% charged before.
Do I lose money with the 20% Lifetime ISA charge?
With no growth, no: on GOV.UK's example, £800 saved plus a £200 bonus is £1,000, and a 20% charge returns £800. With investment gains or losses the result differs.
Is the Lifetime ISA being replaced?
Budget 2026 announced a First Time Buyer ISA from April 2029 for new savers. Existing Lifetime ISA holders can keep using their accounts.