The ins and outs of the lifetime ISA bonus

Heard about the lifetime ISA (LISA) bonus but not quite sure what all the fuss is about? This one’s for you!

Authored on
13 May 2024
Getting started
Read time
  3 minute read

What's the deal with the LISA bonus? 🤔 

What do you think about getting free money to go towards your money goals? With a lifetime ISA, that's exactly what you get – you can contribute up to £4,000 each tax year and receive a generous 25% government bonus.  

How does the lifetime ISA bonus work? ⚙ 

It's pretty straightforward! You'll receive a 25% bonus on all your contributions until you reach 50 years young. That’s always the case, regardless of whether you’re using a cash or investment LISA. However, once you hit 50, you can’t put any more in – no more bonuses after that point! The good news is your investments can keep growing and any cash you’re holding in there can continue gaining that sweet interest. 

Plus, your bonus is free to invest tax-free as soon as it lands in your account. That's right – no taxes, just more money in your pocket. 

When does the bonus arrive? ⏲ 

I’m glad you asked. The bonus is paid monthly, but it's claimed on the 6th of every month for the previous month's contributions. You'll then receive it four weeks later, ready to boost your savings further. 

How do I get my hands on the bonus? 🤲 

No need to lift a finger! We've got you covered. The bonus is paid as cash directly into your lifetime ISA account, ready for you to put to work. Easy peasy! 

And if you're on the brink of owning your first home, we claim the bonus on your behalf and add it to your account or pay it directly to your conveyancer. 

Do I have to pay back the LISA bonus? 💲 

Nope, you're in the clear! The bonus payments you receive are all yours to keep. They're based on the contributions you've made to your lifetime ISA, so consider them your reward for being a savvy saver. 

Thinking about using your lifetime ISA to buy your first home? If your property purchase falls through, you won't be left out of pocket. Any money you withdraw from your lifetime ISA for the purchase will be returned to your account by the conveyancer. And it won't count towards your annual contribution limit. 

What happens if I withdraw money? 💰 

Planning ahead is key! While you can withdraw penalty-free after you hit 60, withdrawals before then incur a 25% charge unless it's for buying your first home (worth up to £450,000) or due to terminal illness. Keep this in mind when managing your savings strategy. 

It’s also worth bearing in mind you'll need to wait before using a new lifetime ISA to help fund a first home purchase. You must have held the account (either with AJ Bell Dodl or with another provider, if you’re looking to transfer) for at least 12 months before you can access the money without a pesky penalty charge. 


Still not sure whether the LISA is for you? You can check out our blog about the limits of the lifetime ISA to help make a decision. If you’ve done your homework, and reckon the LISA is a money match for you, why not open an account with AJ Bell Dodl? It’s one of the lowest cost investment LISA’s around! 



🔔 If you withdraw money from a LISA before age 60, other than to purchase your first home, you will pay a government withdrawal charge of 25%. This may mean you get back less than you paid in. Also, if you choose to save in a lifetime ISA instead of enrolling in, or contributing to, your workplace pension scheme you will miss out on the benefit of your employer’s contributions to that scheme and your current and future entitlement to means tested benefits may be affected. Investing carries risk. Dodl doesn’t give advice, but we do hope the info is helpful! 


It's important to know

You have to be a UK resident for tax purposes to open an account with Dodl.

The past performance of investments isn't an indicator of their future performance and their value can go down as well as up. This means you could get back less than you originally invested. 

Dodl doesn’t offer any advice so if you’re not sure about the risks involved with investing, you should speak to a suitable financial adviser. 

How you're taxed depends on your circumstances, and tax rules can change in future.

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