- Yes. A Lifetime ISA counts as capital for Universal Credit from the day you open it.12
- But DWP counts only 75% of what you would get if you cashed it in while you are under 60, and 100% from 60.1 So a Lifetime ISA worth £16,000 counts as £12,000.
- It is added to your other savings and your partner's. Up to £6,000 in total has no effect, each £250 (or part of £250) above that cuts UC by £4.35 a month, and over £16,000 stops UC.34
The rule and where it comes from
Universal Credit counts all money, savings and investments you own, and GOV.UK's list names Lifetime ISAs alongside cash and stocks and shares ISAs.2
DWP's decision makers' guide, Advice for Decision Making paragraph H1659, says a Lifetime ISA “should be treated as capital from the outset” at 75% of its surrender value where you are under 60 and 100% where you are over 60.1
Separately, GOV.UK says you pay a 25% withdrawal charge if you take money out for anything other than buying your first home, reaching 60 or terminal illness.7 You can open one if you are 18 or over and under 40, and pay in up to £4,000 a year until you are 50, with a 25% government bonus.6
Worked example: a Lifetime ISA that would otherwise stop UC
A single person aged 30 pays £600 a month rent, has no earnings, has £16,000 in a Lifetime ISA and £1,000 in a current account.
| Lifetime ISA value | £16,000 |
| Counted at 75% (under 60) | £12,000 |
| Plus other savings | £1,000 |
| Capital counted for UC | £13,000 |
| Tariff income (each £250 over £6,000 at £4.35) | £121.80 a month |
| Universal Credit a month | £903.10 |
If the Lifetime ISA were counted in full, the total would be £17,000, over the £16,000 limit, and UC would be £0.00.
On its own, a Lifetime ISA can be worth up to about £21,333 before it takes someone under 60 over £16,000, because 75% of that is £16,000.
Worked example: aged 60 or over
From 60 the Lifetime ISA counts in full.1 The same person at 61, still under State Pension age, with £14,000 in the Lifetime ISA and £1,000 in the bank:
| Capital counted for UC | £15,000 |
| Tariff income | £156.60 a month |
| Universal Credit a month | £868.30 |
Common mistakes
Treating it as a pension. Rights in a pension scheme are ignored for Universal Credit,8 but a Lifetime ISA is not a pension: it counts as capital.12
Leaving it off the claim. GOV.UK lists Lifetime ISAs among the savings you must declare, and you must report changes in their value.2
Cashing it in to get under the limit. You lose 25% to the withdrawal charge, and if a significant reason was to get or keep UC, DWP can treat you as still having the money (notional capital).75
Forgetting your partner's. On a joint claim both partners' Lifetime ISAs and savings are added together.32
Buying your first home with it
For a first home, the Lifetime ISA money is paid to your conveyancer and you pay no charge on a home costing £450,000 or less.7 Once you live in the home, its value is ignored for Universal Credit, because the home you live in is disregarded.8
Check what your savings do to UC with the savings calculator →
Universal Credit savings limit calculator 2026/27 UK (free)