How Much Can You Put Into A Lifetime ISA? | Tembo blog (2024)

So you want to start saving towards your first home, but how much should you put aside? Keep reading to find out how much you can put away each year with a Lifetime ISA, and how to work out your own saving goal.

In this guide

• How much can I pay into a Lifetime ISA?
• How much can you open a Lifetime ISA with?
• Can I put £4,000 straight into Lifetime ISA?
• How much should I put into my Lifetime ISA?
• How does the amount I contribute to my Lifetime ISA impact the timeline for purchasing my first home?
• Are there any penalties if I withdraw funds from my Lifetime ISA for purposes other than buying my first home?
• Can I use my Lifetime ISA alongside other savings or investments to purchase my first home?

How much can I pay into a Lifetime ISA?

You can put up to £4,000 into a Lifetime ISA every tax year and the government will top it up by 25%, up to £1,000. So if you’re really dedicated, and have the cash to do it, you could be growing your first home fund by £5,000 a year – £4,000 of your money, plus £1,000 from the government.

Just remember, you can only put up to £20,000 into all of the different ISA accounts in your name per tax year. That overall £20,000 per year limit applies to any Help to Buy ISAs, regular ISAs or Lifetime ISAs that you have. So if you’ve already put £17,000 into a regular ISA this tax year, for example, you can put a max of £3,000 into a Lifetime ISA.

The good thing is, you don’t have to max out your Lifetime ISA at £4,000 every year to see that bonus land in your account. The government gives you 25% on anything you put into your Lifetime ISA.

So if in any tax year you were to put…

💰 £100 in? You’ll get £25 in bonuses.

💰 £875.68 in? You’ll get £218.92 in bonuses.

💰 £3,200 in? You guessed it! You'll get £800 in bonuses.

You might be aiming to top it up as much as you can to squeeze more from the bonus, but it’s completely up to you.

With a stocks & shares Lifetime ISA, you get the 25% government bonus on what you put in, plus any returns on the value of the stocks and shares your money’s invested in. Please note that this can go up as well as down.

How much can you open a Lifetime ISA with?

You can open a Lifetime ISA with as little as £1. So if you want to start saving, you don’t have to wait until you can put away a certain amount. You can get started today, and top up your account later down the line when you can.

Can I put £4,000 straight into Lifetime ISA?

Yes, you can put £4,000 straight into a Lifetime ISA, as long as you haven't maxed out your account for this tax year already, or gone over your annual £20,000 ISA allowance. You can put a maximum of £4,000 into a Lifetime ISA each tax year, and you're paid a 25% bonus from the government monthly, and the maximum bonus you can earn in a tax year is £1,000. So if you paid £4,000 into your Lifetime ISA straight away, you’d get the full £1,000 when the first bonus instalment is paid. If you paid £4,000 over 12 months, you’d get the bonus in smaller instalments.

How much should I put into my Lifetime ISA?

Saving a house deposit is a huge milestone - but how do you know how much to aim for? At Tembo, we’re big believers in goal-setting. That’s why in the Tembo Lifetime ISA app, we make it easy to set a savings goal for your first home deposit.

To do this, there are a couple of things you’ll need to know:

1. Your first home budget (if you’re not sure, you can use our Home Finder that pulls in real-life house prices by area or postcode).
2. The percentage of a deposit you want to put towards your home (you’re typically looking at 10% — 25% if you’re a first-time buyer, but it’s a great idea to have a chat to a mortgage broker first to see if this is realistic for you)
3. How long it’s going to take (our app does all the maths for you and wraps it up neatly into a Time to Buy based on your goal, your saving capabilities and more).

From there, you can prioritise what’s most important to you. If you have a budget in mind, you can break it down year by year. Here are a couple of ways to do that...

🗓️ Divide it by years

If you know you want to be a homeowner in the next 4 years, you just divide your deposit goal by 4.

For example, £20k deposit needed over 4 years = £5k in your Lifetime ISA every year, which would mean you'd have to max it out in order to get the full bonus.

This will help you figure out how much you should put into your Lifetime ISA every year (remember though, the yearly limit of how much you can put in is £4,000 + the max bonus each year is £1,000).

💸 Divide it by £5,000

It might also help to divide your deposit goal by £5,000 (aka the max you can grow your Lifetime ISA by each year with your money + the bonus).

So if you want to have £25,000 aside, this would be 5 years of maxing out a Lifetime ISA and getting the max bonus amount.

After that, it’s our job to help you get there.

We’ll give you tools to keep track of your money that can help you buy your first home sooner.

How does the amount I contribute to my Lifetime ISA impact the timeline for purchasing my first home?

The amount you contribute to your Lifetime ISA significantly impacts the timeline for purchasing your first home. For every £4,000 you put into your Lifetime ISA, the government will top up your savings by up to £1,000 each tax year. So, the more you contribute, the more you can get free money to build your deposit. With a Tembo Lifetime ISA, you can also win money each month in our giveaways, and get contributions from loved ones with our Gift Links.

Are there any penalties if I withdraw funds from my Lifetime ISA for purposes other than buying my first home?

Lifetime ISAs are designed to help first-time buyers purchase a home or save for retirement. If you withdraw your funds from your Lifetime ISA for any other reason, your savings will be subject to a government withdrawal penalty and you’ll also lose any government bonus you’ve accumulated.

Can I use my Lifetime ISA alongside other savings or investments to purchase my first home?

Yes, you can use funds from your Lifetime ISA alongside other savings or investments like other ISAs to purchase your first home. This includes any financial gifts from loved ones, which can be added to your downpayment as a gifted deposit.

Find out more about gifted deposits and the benefits of an early inheritance in this guide.

You might also like our guide on How parents can help their children buy a home.