Research and analysis

Executive Summary — Understanding the use of Lifetime ISAs: quantitative research with holders

Published 4 September 2025

Prepared by IFF Research for HM Revenue and Customs (HMRC)

Marc Cranney, Sarah Howell, Eric Reynolds (IFF Research)

Research report number: 839

July 2025

Disclaimer: The views in this report are the authors’ own and do not necessarily reflect those of HMRC

Glossary

Term	Definition
Help to Buy ISA	A Help to Buy ISA is type of cash Individual Savings Account that was introduced by the UK government to help first-time homebuyers save for a property. New Help to Buy ISAs can no longer be opened.
Income Tax bands and rates	At the time of the survey, Income Tax rates and bands included: the standard Personal Allowance of up to £12,570, basic rate (20%) paid on taxable income of £12,571 to £50,270, higher rate (40%) paid on taxable income of £50,271 to £125,140, and additional rate (45%) paid on taxable income of over £125,140. Income Tax bands are different for Scotland.
Individual Savings Account (ISA)	An Individual Savings Account (ISA) is a type of tax-free savings account. Individuals can save or invest a certain amount of money each year without having to pay Income Tax on their savings and dividend income or Capital Gains Tax on the sales of assets that have increased in value. There are different types of ISAs such as cash ISAs and stocks and shares ISAs.
Lifetime ISA (LISA)	A Lifetime ISA is a type of Individual Savings Account launched in April 2017 to help people aged 18 to 40 save for their first home or later life.
Tax year	Period of 12 months (6 April to 5 April the following calendar year) used by government when setting tax rates and allowances and calculating any tax liabilities.
Withdrawal charge	A 25% charge applied where individuals withdraw their money from the LISA for reasons other than a house purchase for a property that costs £450,000 or less, after the age of 60, or terminal illness. This type of withdrawal is referred to as an ‘unauthorised withdrawal’.

Executive summary

1. Introduction

In January 2024, HM Revenue and Customs (HMRC) commissioned IFF to conduct quantitative research with Lifetime Individual Savings Account (LISA) holders to explore individuals’ knowledge of LISAs, their experience of opening and managing an account, and their different withdrawal experiences. This report outlines the findings.

The LISA became available in April 2017 to help people save for their first home or for later life. Individuals aged 18 to 39 can open a LISA, in which they can save up to £4,000 per year (until the age of 50) and receive a government top-up of 25% on the amount subscribed (maximum £1,000 per year). It is possible for individuals to hold more than one LISA at any one time, provided that they only pay in to one LISA in each tax year.

Individuals can withdraw money from their LISA for 3 reasons:

• to buy a first home, provided the account has been open for 12 months, the purchase price is under £450,000 and a solicitor is being used to buy it with a mortgage
• for later life once the holder reaches the age of 60, from April 2037
• if they have been diagnosed with a terminal illness

If a withdrawal occurs for reasons outside of the 3 stated above, the withdrawal is considered unauthorised, and a withdrawal fee is charged. The withdrawal charge is 25% of the total amount invested in the account including any government bonuses. As well as returning the government bonus, the individual loses some of their own savings as a result.

The overarching aim of this research was to generate a robust, quantifiable understanding of the population who have ‘ever held a LISA’, including who has used the LISA and how far the LISA has supported these individuals to save to purchase a first home and (or) for later life.

Findings in the report are based on 1,613 responses to the survey, conducted between 2 September and 22 November 2024, with individuals who have ever held a LISA.

Data collected was then weighted to make it representative of the population of individuals who have ever held a LISA, addressing oversampling by employment status and withdrawal status, based on information held by HMRC at the time of the survey.

Findings are therefore generalisable to the population of people who have ever held a LISA, referred to as ‘LISA holders’ in the report for brevity.

2. Key findings

2.1 Demographic profile of LISA holders

The majority (84%) of LISA holders were aged between 30 and 47 at the time of the survey. This cohort was fairly evenly split between those aged 30 to 35 (28%), 36 to 41 (30%) and 42 to 47 (27%).

Around 6 in 10 LISA holders were male (62%), 36% were female, and a small proportion (2%) chose not to say.

Around 8 in 10 (79%) LISA holders were White British. One in ten (10%) were Asian or Asian British, 4% were Black or Black British, 3% were mixed or from multiple ethnic groups, a further 3% preferred not to say, and 1% were from another ethnic group.

The majority (79%) of LISA holders reported they were working for an employer at the time of the survey. This includes 74% who were working full-time (30 or more hours per week) and 4% who were working part-time (fewer than 30 hours per week).

LISA holders most commonly lived in London or the South East (26% and 17% respectively).

2.2 Financial and savings profile of LISA holders

Most LISA holders reported being financially secure. Around 2 in 5 (38%) said they were ‘managing OK’ at the time of the survey, and a similar proportion (37%) said they were ‘living comfortably’. 15% said they were ‘just about managing’ financially. A small proportion (7%) said they were finding it difficult.

Around one in ten (11%) LISA holders earned £125,141 or more annually at the time of the survey (additional rate Income Tax band). Around two fifths (37%) were earning £50,271 to £125,140 (higher rate Income Tax band). A third (34%) were earning £12,571 to £50,270 (basic rate Income Tax band), and a small proportion (3%) were earning up to £12,570 (the Personal Allowance). Income Tax bands were correct at the time of the survey. Additionally, 2% did not know their annual income, while 13% preferred not to disclose this information.

LISA holders were highly likely to have other saving products in addition to the LISA. They held an average of 3 other savings products at the time of the survey, and just 2% reported that they had no other method of saving money at this time.

2.3 Reasons for opening a LISA

Just under half (46%) of LISA holders opened their LISA to save for their first home. A similar proportion (45%) did so to save for retirement or later life. A small minority (7%) said they opened a LISA for both of these purposes and 1% could not remember why they opened their account.

2.4 What features of the LISA encouraged holders to open an account

The government bonus and the fact that interest earned is tax-free were overwhelmingly the most important factors in terms of attracting individuals to LISAs.

Almost all (98%) of LISA holders said the government bonus was ‘important’ (including 90% who said it was ‘very important’) in this respect. 92% said the fact that interest earned is tax-free was ‘important’ (including 72% who said it was ‘very important’).

2.5 LISA holders’ experiences of the LISA

LISA holders were generally positive about their experience of having a LISA. More specifically:

• 96% said it was ‘easy’ to open (including 70% who said it was ‘very easy’)
• 89% rated their understanding of the LISA ‘good’ (including 47% who said it was ‘very good’)
• 87% of those who made any withdrawal said the process of withdrawing money from their LISA was ‘easy’
• 83% agreed they would recommend a LISA to others (including 60% who ‘strongly agreed’)

2.6 Reasons for making unauthorised withdrawals

11% of LISA holders had made an unauthorised withdrawal by the time of the research. This includes 3% who made an unauthorised withdrawal to purchase a property outside of the LISA rules, and 8% who made an unauthorised withdrawal for another reason.

Survey results indicate that the majority of unauthorised withdrawals were not a consequence of poor understanding of the LISA rules since:

• 89% of those who had made an unauthorised withdrawal rated their understanding of how their LISA worked as ‘good’, including 46% who rated it ‘very good’
• 88% of those who had made an unauthorised withdrawal said they were aware that a withdrawal charge of 25% (or 20% if they withdrew funds during the temporary decrease due to COVID-19) would be applied to the amount that they withdrew prior to them making the withdrawal
• 86% said that, prior to making the unauthorised withdrawal, they were aware that the withdrawal charge of 25% would mean they would lose all government bonuses and some of the savings in their LISA

Those who made an unauthorised withdrawal for another reason besides purchasing a property were significantly more likely to state they were ‘just about managing’ financially compared with those who were yet to make a withdrawal at the time of the research (30% against 14%, respectively). This indicates that this group were more likely to be in a precarious position financially than those who were yet to make a withdrawal at the time of the survey.

2.7 Perceived impacts of having a LISA

16% of LISA holders had made a withdrawal from their LISA to buy their first home within the LISA rules by the time of the survey. These LISA holders were asked how important they felt having the government bonus added to their LISA savings was in helping them to buy their first home: 

• 29% said the government bonus had been ‘essential’ in enabling them to make the purchase as they would not have been able to do so without the bonus
• 50% said the government bonus was ‘important’ in their purchase – they would still have made the purchase without the bonus, but with some delay or difficulty
• 21% said the government bonus was ‘nice to have’ as they would easily have bought their first home without it

The vast majority (87%) of those who had made a withdrawal from their LISA to buy their first home within the LISA rules felt that it was ‘likely’ that they would have saved and bought their first home had LISAs not existed (46% extremely likely, 41% likely). One in ten (10%) felt this was ‘unlikely’ (8% unlikely, 2% extremely unlikely) and a small proportion (3%) were unsure.