Can I have a Cash ISA and Lifetime ISA?

Key takeaways

• Dual holding: You can legally hold and pay into both a Cash ISA and a Lifetime ISA (LISA) at the same time.
• Contribution limits: You can save up to £4,000 per year in a LISA, which counts toward your total £20,000 annual ISA allowance.
• Government bonus: LISAs provide a 25% bonus (up to £1,000/year) on contributions, whereas Cash ISAs only pay interest.
• Flexibility: Cash ISAs allow for flexible withdrawals, while LISAs charge a 25% penalty for non-eligible withdrawals.
• Transfers: You can transfer funds from a Cash ISA to a LISA, but it is capped at the £4,000 annual LISA limit.

What's the difference between a Cash ISA and a Lifetime ISA?

Both a Lifetime ISA and a Cash ISA are types of Individual Savings Account (ISA) that let you save money tax-free but they work quite differently in practice.

Cash ISA

• Save up to £20,000 tax-free each tax year
• Use your savings for whatever you like, there are no restrictions on purpose
• Earn interest on your balance from your savings provider
• Withdrawal rules vary by provider, but your money is generally accessible

Lifetime ISA

• Save up to £4,000 tax-free each tax year
• Can only be used to save towards your first home (worth up to £450,000) or for retirement
• You must be aged 18–39 to open one, and you can continue paying in until you turn 50
• The government adds a 25% bonus on top of your contributions, up to £1,000 per year which is paid monthly
• Earn interest (cash LISA) or investment returns (stocks & shares LISA) on top of the bonus

In short, a Cash ISA gives you flexibility, while a Lifetime ISA gives you an extra boost specifically for buying your first home or saving for later life.

Can I open a Lifetime ISA if I already have other ISAs?

Yes, you can open a Lifetime ISA even if you already have other ISA types. You might already have a Cash ISA, a Stocks and Shares ISA, or even an Innovative Finance ISA, for example. In fact, you're allowed to open one of each ISA type in the same tax year.

By opening a Lifetime ISA as well, you can place up to £4,000 a year in your LISA, get a 25% boost from the government (up to £1,000), and then place any additional savings or investments in other types of ISA.

Remember, withdrawals from a Lifetime ISA for any purpose other than buying a first home (up to a value of £450,000) or for retirement will incur a 25% government penalty, meaning you may get back less than you paid in.

If you'd like to compare the two, take a look at our Cash ISA vs Lifetime ISA guide.

Can you pay into a Lifetime ISA and a Cash ISA in the same year?

Yes, you can pay into a Lifetime ISA and a Cash ISA in the same tax year. Under existing ISA rules, you can pay into two or more ISAs in the same tax year providing they are different types. So you could pay into a LISA, Cash ISA and Stocks & Shares ISA in the same tax year if you wish. However, you can't pay into two LISAs, two Cash ISAs, or two Stocks and Shares ISAs in the same tax year.

It's worth noting that you can hold multiple Lifetime ISAs you just can only pay into one each tax year. This can be handy if you want to transfer to a new provider offering a better interest rate without closing your old account.

Confusingly, although you can pay into a Cash ISA and a Stocks and Shares ISA in the same tax year, you can't pay into a Cash Lifetime ISA and a Stocks & Shares Lifetime ISA in the same tax year. In the eyes of the government, they're both considered the same type of ISA.

You just have to make sure that the money you deposit across all of your ISAs (including your Lifetime ISA) does not exceed £20,000 - this is the annual ISA limit.

To learn more, take a look at our guide to the Lifetime ISA and the tax year.

Does a Lifetime ISA count towards the ISA limit?

Yes. You can save up to £4,000 every tax year into a Lifetime ISA, but this money counts towards the overall £20,000 ISA limit. This leaves you with up to £16,000 a year to spread across other types of ISA (but not other types of Lifetime ISA).

The good news? The 25% government bonus you receive on your LISA contributions doesn't count towards your ISA allowance so that's up to £1,000 extra on top of your £20,000 limit each year.

If you're saving for a house deposit and you hope to buy a home in the next 3-5 years, it can be a good idea to keep any additional home savings in a Cash ISA. You'll earn interest on your savings and your money will be readily available whenever you need it.

If you place your savings in Stocks & Shares ISA, your money will be invested in the stock market and the value of your investments can go up and down. There's no guarantee you'll get back what you put in, so using this type of ISA for your house deposit can be risky, particularly if you'll need access to your money in the next few years.

Learn more: Is a Lifetime ISA worth it?

Can I transfer money from a Cash ISA to a Lifetime ISA?

Yes, you may be able to transfer money from an existing Cash ISA into a Lifetime ISA. This works whether you're moving funds between two different providers or transferring within the same provider, if you hold both accounts with them. Just keep in mind that not all providers support ISA transfers, so it's worth checking beforehand.

The funds you transfer from a Cash ISA into your LISA will qualify for the 25% government bonus. Since the bonus is now paid monthly, you'll usually see it added to your account within a few weeks of the transfer completing.

Here's how the transfer limit works:

• You can only transfer enough to bring your LISA contributions up to the £4,000 annual limit
• If you've already put £1,000 into your LISA this tax year, you can transfer up to £3,000 from your Cash ISA
• If you haven't put any money into your LISA yet this tax year, you can transfer up to the full £4,000
• Any additional savings will need to stay in your Cash ISA until the following tax year