Nutty

The best Lifetime ISAs

Edward Savage
Personal Finance Editor
Updated
May 21, 2024

In a nutshell

The best Lifetime ISA overall is Tembo – it’s got one the highest interest rates out there, and it’s easy to set up and use. They’ll even help with the mortgage when the time comes to buy your first home. Moneybox is great too, with a top interest rate (but reduces after a year).

Gearing up to start saving for your first home? Great. A Lifetime ISA is pretty much perfect for you.

If you’re thinking about using a Lifetime ISA to save for retirement, you might want to consider a pension too – here’s our guide to a Lifetime ISA vs pension.

Anyway, keen to get that free juicy 25% bonus from the government as soon as possible? Who wouldn’t. Here’s the best Lifetime ISAs, and after that we’ll run through everything you need to know about them.

Best Lifetime ISAs

The highest paying interest rates on cash savings and easy to use.

Best Lifetime ISA

Tembo comes out top – it’s one of the highest interest rates, easy to use and great service.

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Tembo rated 5 stars

Tembo

Tembo is one of the best Lifetime ISAs out there – it’s got one of the best interest rates out there, and it’s easy to use, with a great app on your phone, packed with tools to help you save more.

They’ll also transfer your existing Lifetime ISA over if you have one too (they’ll handle everything).

There’s two options, a Cash LISA (with the top interest rate), or a Stocks and Shares LISA, where you can simply let the experts handle things, and aim to grow your money more over time).

They'll also be able to help you with the mortgage when the time comes to buy your first home – and help you borrow more if you need to.

The customer service is top notch too.

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Pros

  • Top interest rate
  • Easy to use
  • Cash LISA
  • Stocks and Shares LISA
  • Awesome customer support
  • Transfer existing LISAs

Cons

  • Need to use their app rather than their website (but it’s a great app)
  • Not much else!
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Great
Moneybox rated 5 stars

Moneybox

Saving for your first home? Moneybox could be for you.

Moneybox is the go-to place for Lifetime ISAs – it’s easy to use, and you’ll be able to manage everything on a great mobile app.

You can either pick from saving cash (Cash Lifetime ISA), and benefit from a great savings rate. And there’s no fee for saving cash.

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Or, you can make your own investments (Stocks and Shares Lifetime ISA), and pick from a range of investment options (including individual US shares such as Apple and Amazon). Fees will apply.

Moneybox will handle everything behind the scenes, and collect your 25% government bonus and automatically add it to your account.

Overall, it’s low cost overall, and the customer service is excellent.

Note: don’t wait to get started, as you’ll need to wait 12 months before you can use your LISA to buy a home – all you need to do is add £1.

Capital at risk.

Best Lifetime ISA

Tembo comes out top – it’s one of the highest interest rates, easy to use and great service.

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Best Stocks and Shares Lifetime ISA

If you’re an experienced investor and want to make your own investments.

Best Lifetime ISA

Tembo comes out top – it’s one of the highest interest rates, easy to use and great service.

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Investing
Hargreaves Lansdown rated 3 stars

Hargreaves Lansdown

Hargreaves Lansdown (HL) is the most popular investment platform in the UK, it’s used by over 1.8 million people, saving over £130 billion. It’s very trustworthy, and safe to use.

They offer a great Stocks and Shares Lifetime ISA – which offers the full range of investment options, but also has reduced costs just for the LISA (compared to other types of investment accounts), making it one of the best LISA options out there.

It’s great for making your own investments, or you can pick ready-made choices where you can leave it to the experts.

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Our criteria for the best Lifetime ISAs

Lifetime ISAs are pretty great for building up your savings to buy your first home, or even savings for later in life, but they’re not all the same – they can vary quite a bit, and you could make a lot more cash from your savings by picking a great one!

How to use your Lifetime ISA

We’ve done the research to find the best Lifetime ISAs out there, comparing the ins-and-outs, and how much your money could grow over time, so you can be confident in making the right choice for you.

Here’s the criteria we looked at:

  • Interest rate (how much you’ll make)
  • Ease of use
  • Customer service
  • Investment options (for Stocks and Shares LISAs)
  • Fees
  • Customer reviews

There’s a fair few options out there for a Lifetime ISA, and that includes either a Cash Lifetime ISA (where you simply save cash in return for interest, similar to a savings account), and a Stocks and Shares Lifetime ISA (where your money is invested so it could grow more over time). We’ll cover both in detail below.

Whichever LISA you opt for from our list of recommendations, you can be sure you’re picking one of the very best out there – ones we recommend to our friends and family, and readers of course.

What is a Lifetime ISA?

Before we get too carried away, let’s just run through Lifetime ISAs (LISA to those in the know) so we’re all on the same page.

A Lifetime ISA (Individual Savings Account) is a government scheme to predominantly help you buy your first home. You’re able to save up to £4,000 per tax year (April 6th to April 5th the following year), and every time you add money, you’ll get a massive 25% bonus. Which is paid directly into your LISA account by the government.

Lifetime ISA (LISA)

That’s a massive £1,000 per year if you’re able to save £4,000 per year.

Your money will also grow tax-free, so it can grow much more over time, and you can withdraw it tax-free too (as long as you use it for its intended purpose of buying a home).

You can open one any time you like, as long as you’re under 40, and keep paying into it until you’re 50. If you don’t use it for your first home, you’ll be able to withdraw it after you turn 60 (similar to a pension).

If you want to withdraw it before you’re 60, and don’t use it for your first home, you’ll have to pay a penalty of 25% of the value of the LISA – that’s actually more than the free cash you’d have got (it sounds odd but the maths works out), so it’s not really worth withdrawing if you can help it.

When using it for your first home, and it must be your first home, the property value must be less than £450,000.

And, one last thing. Your LISA needs to be open for a full 12 months before you can use it. So get cracking and open one today, all you need to do is add £1 into it and the timer starts.

If you’re not sure where to get started with a LISA, check out Tembo¹, it’s one of the highest interest rates out there, easy to use and has great customer service (plus, they’ll help you with the mortgage when the time comes to buy your home).

Best Lifetime ISA

Note: you can only open and save into one Lifetime ISA per tax year, but you can transfer it to a new provider (company) whenever you like. More on that below.

LISA eligibility

Let’s just run through that again as a quick summary, and to make sure you’re eligible for a LISA…

To open and use a LISA, you’ll need to:

  • Be a UK resident
  • Be aged between 18 and 39
  • Be a first time buyer (someone who hasn’t bought their own home before)
  • Buy a home for less than £450,000
  • Buy a home with a mortgage
  • Live in your new home (e.g. you can’t buy to rent it out)
  • Have your LISA open for least 12 months

What’s a Cash Lifetime ISA?

A Cash Lifetime ISA is just like a savings account you’re likely familiar with – you add money, and you earn interest in return. Except with a LISA, you get the 25% bonus from the government too!

The interest rates are normally pretty great, so you’re not missing out by saving into a LISA rather than a regular savings account.

Your money will grow steadily over time until you’re ready to use it.

Cash Lifetime ISA

One of the highest interest rates for a Cash LISA out there at the moment is Tembo¹.

What’s a Stocks and Shares Lifetime ISA?

A Stocks and Shares Lifetime ISA is a bit different. This is where instead of your cash earning interest, your money is invested so it can grow over time (tax-free) – and typically investing your money would see your money grow more than if it was just in a savings account or Cash Lifetime ISA.

However, investing is typically for the long-term, so these are a good idea if you’re not planning on buying your first home any time soon (for instance 5 years or more).

And don’t worry about not knowing anything about investing – you can simply let the experts handle things, and they’ll aim to grow your money sensibly over time, all ready for when you’re ready to buy a home.

There will be ups and downs along the way, but that’s all part of investing, and those ups and downs are typically how your money is able to grow larger over time (compared to saving cash).

Stocks and Shares Lifetime ISA

If you think a Stocks and Shares ISA might be for you, again, check out Tembo¹, where they’ve got an option for the experts to manage your money. Or, check out the best Stocks and Shares Lifetime ISAs if you’re keen to make lots of your own investments.

Note: the tax you’d typically pay outside of an ISA is Capital Gains Tax (if your money grows) and Income Tax (if your investments provide any income), and Dividend Tax (if your investments pay any of their profits to you).

Lifetime ISA - No tax

How much is a LISA?

Good news. LISAs are typically low cost overall. 

In fact, Cash Lifetime ISAs are typically fee free – the provider will make money, but they’ll effectively take the money from the interest rate behind the scenes, rather than charging you directly (e.g. they’ll use your money to earn interest, and then give you a slightly lower interest rate that they get, and pocket the difference).

There will be fees with a Stocks and Shares Lifetime ISA, as there’s a bit more going on behind the scenes, and you’ll be buying and selling investments – or the experts will on your behalf.

Typically there will be an account fee, which is often a percentage of your savings (such as 0.35% per year), and then a fee for the investment itself, which depends on the investment. If you let the experts handle things, this can also be a percentage of your savings, and could range from around 0.15% to 1%+.

Providing you invest for the long term, and done sensibly, you should expect to make much more than the fees you pay over time, so it’s often worth it (but there’s no guarantees).

Can I transfer my LISA?

If you already have a LISA, you can actually transfer this to a new provider if you want to, whenever you like, so you can always be getting the best interest rate – and it’s free to switch providers.

It’s easy to do too, all you need to do is let your new LISA provider know that you want to transfer a LISA, rather than open a brand new LISA. They’ll handle everything, including getting in touch with your old provider, and your money will simply turn up in your new account (after around 6 weeks).

Can I have a LISA and an ISA?

Yep! You can have all the different types of ISAs, a Cash ISA (to save cash), a Stocks and Shares ISA (to invest your money), and a Lifetime ISA (to save for your first home). There’s also the less popular Innovative Finance ISA (where you can lend money to other people).

Overall, you’ll be able to save up to £20,000 per tax year (April 6th to April 5th), across all your different ISAs – however, you can only save £4,000 into your LISA each year.

ISA allowanace

Note: you typically can’t transfer other ISAs to your Lifetime ISA, you normally need to start saving from scratch – however you can withdraw from your other ISAs and put the money into your LISA, providing it’s under £4,000 per year.

How do I use a LISA to buy a home?

This bit is pretty simple (phew!). Once you’ve found the home of your dreams, or at least the first home you’ll love, as part of the home buying process, you’ll need to get a conveyancer to handle the legal side (that’s a legal person like a lawyer, but they just focus on property).

Let your conveyancer know that you’re planning to use your LISA to help buy your home, give them the LISA details and they’ll take it from there – they’ll sort all the paperwork so you can use the cash for your home. That’s it. Simple right?

Can I use a LISA with a partner?

Yep! Two of you can both use your LISAs to buy a home together if you want to – so you can get double the bonus!

However, you both need to be a ‘first time buyer’ to use both. A first time buyer is someone who hasn’t bought a home for themselves before.

If your partner has a home already, but you don’t, you can use your LISA, but they won’t be able to use theirs.

What if I can’t use my LISA to buy a home?

As the current limit for buying a home is a maximum of £450,000 (with a LISA), and house prices keep growing and growing, some people are finding that the house they want is actually above that limit – meaning they now can’t use their LISA.

It’s a bit of a pain, and means your savings now take a hit if you want to use them for a home above £450,000 – you’ll need to cash out your LISA and pay the penalty of 25%, which will mean you’ll end losing the government bonus, and even a bit of your own savings too (although fingers crossed, your money might have grown enough so you’re still in profit).

Otherwise, if you’re fortunate enough to have savings elsewhere, you could use those for your home deposit, and keep your savings in your LISA to use for later in life…

If you do this, you could instead keep your LISA as an addition to your retirement savings, and withdraw them from the age of 60 (completely tax-free), and if you can, keep saving into it, collecting the 25% bonus. You can keep saving until the age of 50, and your annual allowance will still remain at £4,000 per year.

LISA vs pension

If you’re thinking about using a LISA to solely save for retirement (or later in life), instead of for your first home, it is a great option, as you’ll bag the 25% government bonus on all the money you add, and your money grows tax-free.

Lifetime ISA vs Pension

However, if you’re earning over £50,270 per year, you might find that saving into a personal pension might be a better option for you. (A personal pension is a pension you set up yourself, rather than your employer setting it up for you.)

With a personal pension, you’ll also get a 25% bonus from the government on all the money you add, and if you are a higher rate taxpayer (40%) or additional rate taxpayer (45%), you’ll also be able to claim back some of the tax you’d paid at those rates too (on a Self Assessment tax return). So it can work out potentially much better if you’re earning more.

Personal pension

Your money will grow tax-free too, however you might pay tax on it when the time comes to retire and withdraw your money, although 25% of it will always be tax-free. Your pension is taxed as your salary is now, so you might pay Income Tax on it depending on how much you withdraw at the time.

You can also save lots more cash into a pension, up to £60,000, or your total annual income (e.g. salary), whichever is lower. And, you’ll be able to start withdrawing from it from age 55 (57 from 2028).

Pension annual allowance

If a pension sounds interesting, we recommend checking out PensionBee¹, it’s easy to use, low cost and a great track record of growing pensions over time. Or, check out all the best pension providers.

Nuts About Money tip: learn even more with our guide Lifetime ISA vs pension.

Are LISAs safe?

Yep! Using a Lifetime ISA is perfectly safe.

All Lifetime ISA providers need to be authorised by the Financial Conduct Authority (FCA), which means they’ve been reviewed and approved to look after your money. They’re also regularly checked to ensure they’re continuing to look after your cash.

Lifetime ISA providers are authorised by the Financial Conduct Authority (FCA)

That also means your money is protected by the Financial Services Compensation Scheme (FSCS), which means you’re protected by up to £85,000 should anything happen to the Lifetime ISA provider, such as going out of business.

Protected by the Financial Services Compensation Scheme (FSCS)

If you’re investing within a Stocks and Shares Lifetime ISA, your money can still go up and down over time. Although if you’re investing sensibly (such as with experts), it’s more likely to increase over time.

Let’s recap

There we have it, the best Lifetime ISAs, and an overview of why Lifetime ISAs are pretty great to help buy your first home.

Don’t delay in opening yours, as you’ll need to have it open for at least 12 months before you can use it – just open one and add £1 to it to start the clock. You can always transfer it to another LISA provider later down the line if you see a better savings rate.

You can save up to £4,000 per year and get a massive 25% bonus (up to £1,000), so it’s often worth doing – providing you expect to buy a home for less than £450,000 (and you’re a first time buyer).

Our top recommendation for a LISA is Tembo¹, it’s easy to set up, and it’s got one of the highest interest rates out there – they’ll also help you with the mortgage when the time comes to buy your home, and even have options to help you borrow more than you normally could.

Or, you could also consider Moneybox¹, where you’ll get a great interest rate to start with, but reduces after the first 12 months.

If you’re keen to make your own investments, learn more with our guide to the best Stocks and Shares LISAs.

That’s it. All the best for saving for your first home!

Best Lifetime ISA

Tembo comes out top – it’s one of the highest interest rates, easy to use and great service.

Visit Tembo¹Visit Tembo¹
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Best Lifetime ISA

Tembo comes out top – it’s one of the highest interest rates, easy to use and great service.

Visit Tembo¹Visit Tembo¹

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