The Lifetime ISA bonus and growth worked forward, and the withdrawal charge worked honestly — including why it costs more than the bonus gave.
Paying £4,000 a year into a Lifetime ISA for 5 years earns £5,000 of government bonus on £20,000 paid in, and at 4% growth the pot reaches £27,574.59. The same calculator works the other ending honestly: an unauthorised withdrawal — anything that is not a qualifying first home, the charge-free age, or terminal illness — pays a 25% charge on the amount withdrawn — the whole pot, if you take everything — which costs more than the 25% bonus gave. Every £100 paid in becomes £125 with the bonus and shrinks to £93.75 after the charge: a 6.25% loss on your own money, before any growth.
What you pay in each tax year, for how long, and a growth rate of your choosing — the rate is an example, not a promise.
The charge costs more than the bonus gave. Every £100 paid in becomes £125.00 with the 25% bonus; an unauthorised withdrawal's 25% charge takes £31.25 of that, leaving £93.75 — a 6.25% loss on what you paid in, before any growth.
On your figures, growth has outrun the charge — an unauthorised withdrawal keeps £20,680.94, more than you paid in — but it still hands back £6,893.65 against the £27,574.59 a charge-free withdrawal keeps.
Charge-free withdrawals: buying a first home costing up to £450,000 at least 12 months after your first payment into the account, from age 60, or if you are terminally ill with less than 12 months to live. You must open the account before turning 40 and can pay in until 50.
The growth rate is yours to set, not a market rate. A planning estimate, not financial advice.
| Tax/source year | 2026/27 |
|---|---|
| Region | UK-wide: savings interest is taxed on the UK bands and thresholds in every UK nation, including for Scottish taxpayers |
| Account rates | Never assumed. Any interest rate in a savings calculation is an input you set, stated beside the result. |
| Your other income | Wages and pension income decide how much Personal Allowance and starting rate are left for interest, and which Personal Savings Allowance band applies. |
|---|---|
| The interest itself | Interest counts towards the income that sets your band, so a large interest year can shrink the allowance that was meant to cover it. |
| The account's wrapper | The same balance at the same rate is taxed outside an ISA and untouched inside one; the wrapper, not the rate, decides whether the allowances are needed. |
| What is not decided here | PayBreakdown does not decide payroll correctness, lender approval, benefit entitlement or employer compliance, and does not give regulated financial, mortgage, debt, tax, payroll or legal advice. |
|---|
Ending one is what the account is for: a first home costing up to £450,000 at least 12 months after your first payment into the account, or any withdrawal from age 60 — the whole pot, bonus and growth included, charge-free. Being terminally ill with less than 12 months to live is also charge-free. Ending two is everything else: the 25% charge applies to whatever you withdraw — the whole pot if you take everything, growth included — and taking a smaller amount means withdrawing more than you need so the charge is covered. The charge is deliberately bigger than the bonus — it recovers the bonus and takes a slice of your own contributions with it, which is the number this page derives rather than asserts.
The age rules bracket the whole scheme: you must open the account before turning 40, and you can pay in until 50.
The bonus is modelled as arriving with each contribution, which is close to the monthly payment schedule HMRC actually runs but not to the day. Growth is a single steady rate you choose — a cash LISA's interest or an assumed investment return — and investment values can fall as well as rise, which a steady rate cannot show. House-price rules, provider transfer mechanics and the interaction with the overall ISA allowance are not modelled. Nothing here recommends a Lifetime ISA over any alternative; it works the arithmetic of the rules as published.
Change any figure above and the result moves with it. A payslip can differ from any calculator because payroll works pay period by pay period, so a tax-code change, a bonus, arrears or a refund can land in one month and not the next. See how each deduction is worked out.
Because the percentages apply to different amounts. The bonus adds 25% of what you pay in; the charge takes 25% of what you withdraw — money that already includes the bonus. The calculator derives the result on its own figures — the loss lands at 6.25% of your contributions, before any growth is counted.
Yes, if growth has outrun the charge — the calculator says so plainly when your figures land that way. The structural loss stands regardless: against a charge-free withdrawal you hand back the entire charge, so the comparison that matters is charged versus charge-free, not charged versus paid-in.
Its annual cap counts within the overall ISA allowance for the year — money in a Lifetime ISA is ISA money. The savings hub covers how the overall allowance works; this page keeps to the Lifetime ISA's own arithmetic.
Last updated 2026-08-28. Checked by Sean Elsmore. Rates last checked against GOV.UK on 2026-08-07. Estimates are for planning and should be checked against official records where the decision matters.