Your 3 big LISA questions answered
Since their launch, Lifetime ISAs (LISAs) have played a meaningful role in helping people onto the property ladder.
Government figures show that 228,000 people have used a LISA to buy their first home since 2018–19.
With the government now confirming plans to review the Lifetime ISA, it’s a good time to revisit how LISAs work, how they fit alongside other ISAs, and some of the questions we’re most often asked.
1. Can I open a LISA for my child or grandchild?
The short answer is no. If a child is over 18 and under 40, they must set up their own LISA. This makes sense as like any ISA, your annual allowance is linked to your National Insurance number.
However, there is nothing to stop you gifting your child money for their LISA (tax rules around gifts apply, of course).
Parents and grandparents recognise that the 25% government bonus is a good reason for the over 18s to open a LISA, as a top up of £1,000 each year is currently available. Nudging them to open one if they are planning to own a home one day might make sense.
2. Can I have a LISA and other ISAs?
Yes — you can split your annual £20,000 ISA allowance across different types of ISA, including a Lifetime ISA, Cash ISA and Stocks & Shares ISA.
You can pay up to £4,000 a year into a Lifetime ISA, with the remainder of your allowance available for other ISAs. There’s no separate annual limit for a Cash ISA — it forms part of your overall ISA allowance.
This flexibility allows you to balance different goals. For example, you might hold cash for shorter-term needs, while investing through a Stocks & Shares ISA or LISA for longer-term plans.
Looking ahead, the government has said it plans to change the annual amount that can be paid into a Cash ISA in future. Subject to legislation, from April 2027 people under 65 may be able to pay up to £12,000 into a Cash ISA each tax year, while the overall ISA allowance may remain £20,000.
As with any investment decision, it’s worth thinking about time horizons. Investing is typically considered over five years or more, to help ride out market ups and downs.
3. Is the 25% bonus paid on the value of my investments or on what I pay in?
An important question for anyone with a Stocks & Shares LISA. Happily, the bonus is paid on what you pay in, not on the value of your investments on the day.
For example, let’s say you pay in £1,000 on 1st of the month and invest it. EQi can claim bonuses on your behalf on 6th of every month. It would not matter if the value of that investment had fallen to £980 on that day. You will receive £250 as it is 25% of what you paid in that month.
It’s also useful to know that although the bonus is paid monthly, it is based on your contribution during the previous month. It then takes around a further four weeks to appear in your account.
