The government has confirmed that the Lifetime ISA is being replaced by a new First Time Buyer ISA, and the consultation sets out how it would work: no withdrawal charge, open to anyone aged 18 and over with no upper age limit, and a bonus paid only when you actually complete on a home. But the three numbers that decide whether it is any good — the bonus rate, the annual subscription limit and the property price cap — have not been announced, and HM Treasury’s consultation on the design closes at 11:59pm on 18 August 2026.
This article sets out what is confirmed, what is not, why the Lifetime ISA is being scrapped, and what a LISA holder or would-be first-time buyer should do between now and the Budget on 28 October 2026. Where a figure has not been published, we say so rather than guess.
What has actually been confirmed
HM Treasury opened its First Time Buyer ISA consultation at 10am on 22 June 2026 (GOV.UK shows a publication date of 23 June). Its opening line is blunt: the new product “will be offered in place of the Lifetime ISA”. This is a replacement, not a tweak.
The consultation document confirms the mechanics. It will be open to anyone aged 18 or over, with no upper age limit. There will be no withdrawal charge — take your money out and it behaves like a cash ISA. The trade-off is that the bonus is only available where you withdraw to buy a property with a legal mortgage.
The bonus is calculated differently from the LISA’s. It will be “paid as a percentage of subscriptions made, rather than the value of the account, at the point that an individual withdraws funds”, and it is worked out on net subscriptions — what you paid in, minus anything you took out first. Growth and interest earn no bonus. It is claimed by and paid to your ISA manager, who releases the money to your conveyancer.
Two timing rules matter: the account must have been open at least 12 months before a bonus can be claimed, and the purchase must complete within 90 days of the claim. Both cash and stocks and shares versions are proposed, and you will only be able to subscribe to one LISA or one First Time Buyer ISA in a tax year.
For existing savers, the key confirmation is that you cannot transfer a Lifetime ISA into the new product. You can hold both, and the consultation is explicit that funds from each can go towards the same purchase. Until the new product launches, you can still open a Lifetime ISA and keep paying into one under existing rules.
The three numbers nobody knows yet
If you have seen an article quoting a bonus rate, an annual limit or a price cap for the First Time Buyer ISA, it is guesswork. The consultation says so in one sentence: “Subscription limits, property price caps and the level of the government bonus will be announced at a future fiscal event to take account of market conditions and wider public finance context.”
That is three of the four things that decide whether the new account beats the old one. The consultation names the two predecessors for context — the Help to Buy ISA paid 25 per cent up to £3,000 on £12,000 of savings, the Lifetime ISA pays 25 per cent on up to £4,000 a year — but commits to neither.
The next fiscal event is the Budget. The Chancellor’s letter to the Treasury Select Committee of 31 July 2026 confirms the Budget will be delivered on 28 October 2026, alongside an OBR forecast. That is the earliest realistic date for the missing numbers, though nothing obliges the government to publish them then.
There is no launch date either — the consultation says only that the government wants the product “available as soon as practically possible”. Even the basics have wobbled: HMRC’s tax-free savings newsletter 22 gave the closing date as 17 August 2026, while the consultation page says 11:59pm on 18 August.
Why the Lifetime ISA is being replaced
The case against the LISA was made most forcefully by the House of Commons Treasury Committee, whose report Lifetime Individual Savings Account was published on 30 June 2025. Its central finding is a maths problem hiding in plain sight.
The bonus is 25 per cent of what you pay in. The unauthorised withdrawal charge is 25 per cent of what you take out — and by then the pot includes the bonus and any interest. Those two percentages do not cancel out. As the Committee put it, savers lose “the Government bonuses that they have received, plus 6.25% of their own contributions”. Gov.uk’s own worked example is stark: £800 saved plus a £200 bonus is £1,000, and a full withdrawal triggers a £250 charge, leaving £750. You put in £800 and got back £750.
That would be a footnote if it were rare. It is not. The Committee found that “in 2023–24, 99,650 people made unauthorised withdrawals while only 56,900 people used their LISA to buy a home”. In that year £75 million was paid in charges, a 39 per cent rise, and around £213 million has been collected from about 286,000 people over the six tax years to 2023–24.
The Treasury’s own consultation now repeats the point in its own words: “More LISA holders have lost a part of their original savings than have used it to purchase a house,” and that the number of unauthorised withdrawal charges is “increasing year on year, reaching 8% of all accounts opened in 2024-25”. Against that, the consultation records that as of 2024-25, 314,600 savers have used a Lifetime ISA to buy a first home.
The second charge is that the LISA tries to do two jobs — deposit account and retirement account — a combination the Committee concluded “makes the Lifetime ISA complex and increases the risk of consumers choosing unsuitable investment strategies”. It cited data from Moneybox showing that only 8 per cent of its customers who had already bought a home with their Moneybox LISA made a further contribution in the 2019–20 tax year. The government’s formal response of 11 September 2025 defended the product. Nine months later it published a plan to replace it.
The £450,000 cap that has not moved since 2017
The Lifetime ISA can only be used on a first home costing £450,000 or less, a figure that has applied UK-wide since the account launched in April 2017 and has never been uprated. House prices have been less static: the Treasury Committee noted average UK prices had risen by more than 30 per cent since 2017.
For most of the country that still leaves room. ONS figures in the house prices bulletin of 22 July 2026 put the average UK house price at £271,000 in May 2026, up 2.7 per cent over 12 months, with England at £292,000, Wales at £215,000 and Scotland at £196,000; Northern Ireland, which is reported quarterly, averaged £198,000 in the first quarter of 2026. The cap bites in London and the commuter belt, and it is spreading: the Committee cited a projection that more than 10 per cent of local authority areas in Great Britain will have an average first-time buyer price above the cap by the fourth quarter of 2027.
This is the cruellest version of the withdrawal charge: save for six years, find the only flat you can buy costs £465,000, and you either walk away or pay a penalty to reach your own deposit. The third flaw is the age wall — you must be 18 to 39 to open a LISA and cannot pay in past 50, when the Committee noted that the English Housing Survey puts the average age of a first-time buyer in England at 34. Our full guide to the Lifetime ISA covers the current rules.
Lifetime ISA and First Time Buyer ISA, side by side
Here is where the two products stand today. Every “not announced” in the right-hand column is a real gap in the published policy, not an omission on our part.
| Feature | Lifetime ISA (now) | First Time Buyer ISA (proposed) |
|---|---|---|
| Who can open one | Aged 18 to 39 | Aged 18 or over, no upper age limit |
| Paying in | Up to £4,000 a year, stopping at 50 | Subscription limit not announced |
| Government bonus | 25% of contributions, up to £1,000 a year | Rate not announced; a percentage of net subscriptions |
| When the bonus arrives | Paid into the account before you buy | Only on withdrawal to buy, via your ISA manager |
| Charge for taking money out | 25% unauthorised withdrawal charge | None — but no bonus either |
| Property price cap | £450,000, unchanged since 2017 | Not announced |
| Purchase conditions | First home, with a mortgage, 12 months after your first payment | First home, with a legal mortgage, account open 12 months, completion within 90 days of claiming |
| Retirement use | Penalty-free access from age 60 | None — first home only |
| Account types | Cash and stocks and shares | Cash and stocks and shares |
| Transfers in from a LISA | Not permitted — but you may hold both and use both for the same purchase | |
Saving a deposit while the rules are in flux?
We track every confirmed change to ISAs, savings rates and first-time buyer schemes as it is published, not as it is rumoured.
Explore GetSmartSaver →Should you keep paying into your Lifetime ISA?
For most people, yes. The Lifetime ISA bonus is 25 per cent and confirmed; the First Time Buyer ISA bonus is a blank. A guaranteed £1,000 a year beats an unannounced percentage on an unannounced limit at an unannounced date.
If you are buying within the next year or two, under the cap
Keep going. Paying in £4,000 before 5 April 2027 earns £1,000 you would not otherwise get, and the new account cannot help you in time — even if it launched tomorrow, the 12-month holding period means no bonus for a year. LISA payments count towards the same £20,000 ISA allowance as everything else; our ISA allowance tracker keeps the running total straight.
If you are years away, or shopping near the cap
Here caution is warranted. If there is a real chance your home will cost more than £450,000, or that you will need the money for something else, every pound you add is exposed to the 25 per cent charge. One reasonable approach: keep the LISA open and modestly funded, hold the rest of the deposit in an ordinary cash ISA, and decide once the Budget fills in the blanks.
Bear in mind that because the new bonus is based on net subscriptions rather than account value, money you take out before claiming reduces it. And since you can hold both accounts and use both on one purchase, opening a First Time Buyer ISA later does not mean unwinding your LISA.
If you have been using a LISA for retirement
The First Time Buyer ISA does nothing for you — it has no retirement leg. Existing LISA holders can carry on saving under current rules, including penalty-free access from 60. But the direction of travel is clear, and for most people a workplace pension with employer contributions and tax relief remains the stronger retirement vehicle.
How this fits the wider ISA shake-up
The First Time Buyer ISA is one part of a much larger set of changes. The Tax Update 2026 summary sets out the package, and the biggest single item lands on 6 April 2027.
From that date the cash ISA subscription limit falls to £12,000 for savers under 65, while the overall ISA allowance stays at £20,000 — so the remaining £8,000 must go into stocks and shares or an innovative finance ISA if you want to use it. Anyone who is 65 or over at the end of the tax year keeps a £20,000 cash limit, so the year you turn 65 is covered in full. The anti-circumvention factsheet also confirms a 22 per cent charge on interest from cash held inside non-cash ISAs.
For a deposit saver that matters. It makes this tax year — when the full £20,000 can still go into cash — unusually valuable, and strengthens the case for filling your LISA now. We cover the mechanics in our 2026 ISA allowance guide.
What to do between now and the Budget
- Do not stop contributing on a rumour. The LISA bonus is live and worth up to £1,000 a year; nothing about the replacement is guaranteed.
- Check the £450,000 cap against your target area before adding another year of contributions, using sold prices from HM Land Registry or Registers of Scotland, not asking prices.
- Think twice about opening a LISA at 39 if you are undecided. The age wall closes at 40, but the new product has no upper age limit, so waiting costs less than it used to.
- Use the £20,000 cash allowance while you have it — it drops to £12,000 for the under-65s on 6 April 2027.
- Diarise 28 October 2026. That is when the bonus rate, subscription limit and price cap are most likely to appear.
- Sort the mortgage in parallel. The bonus only applies to a purchase with a legal mortgage, so borrowing capacity, not your ISA, is usually the binding constraint — see our guide to first-time buyer mortgages in 2026.
A note on scale. HMRC’s annual savings statistics of 18 September 2025 show Lifetime ISA subscriptions up 25.3 per cent in 2023–24, an extra £474 million on the year before. This is not a niche product being quietly retired; it is a popular one being replaced because the penalty at its heart does more harm than the bonus does good.
Frequently asked questions
Is the Lifetime ISA definitely being scrapped?
The government has confirmed the intention. HM Treasury’s consultation, published on 23 June 2026, says the new First Time Buyer ISA “will be offered in place of the Lifetime ISA” once available. No closing date for LISA applications has been set, and until the new product launches you can still open a Lifetime ISA and keep contributing under existing rules.
How big will the First Time Buyer ISA bonus be?
Nobody knows. The consultation states that subscription limits, property price caps and the level of the bonus “will be announced at a future fiscal event”. The next one is the Budget on 28 October 2026. For reference, the Lifetime ISA pays 25 per cent on up to £4,000 a year and the old Help to Buy ISA paid 25 per cent up to £3,000.
Can I move my Lifetime ISA into the new account?
No. The consultation confirms Lifetime ISA funds cannot be transferred into the First Time Buyer ISA. You can hold both accounts, and you will be able to use money from both towards the same property purchase. You may only subscribe to one of the two in any single tax year, so you cannot pay into both at once.
Why does the Lifetime ISA give back less than you paid in?
Because the 25 per cent bonus is applied to your contributions but the 25 per cent charge is applied to the whole pot. The Treasury Committee calculated that savers lose the bonus plus 6.25 per cent of their own money. GOV.UK’s example: £800 saved plus a £200 bonus equals £1,000, and a £250 charge leaves £750.
Will the £450,000 property price cap go up?
The Lifetime ISA cap has not moved since April 2017 and no increase has been announced. The First Time Buyer ISA will have its own cap, but the figure is deferred to a future fiscal event. The Treasury Committee cited a projection that over 10 per cent of Great Britain’s local authority areas will have an average first-time buyer price above £450,000 by late 2027.
Is there really no penalty for withdrawing from a First Time Buyer ISA?
Correct — the consultation says withdrawals will work like a cash ISA, with no withdrawal charge. The catch is that the government bonus is only paid where you withdraw to buy a property with a legal mortgage, the account has been open 12 months, and you complete within 90 days of claiming. Withdraw for any other reason and you simply get your own money.
Last reviewed: August 2026. Figures relate to the 2026/27 tax year, which runs from 6 April 2026 to 5 April 2027, and are taken from HM Treasury, HMRC, GOV.UK, ONS and House of Commons publications current at the time of writing. The First Time Buyer ISA is a consultation proposal, not law, and its bonus rate, subscription limit and property price cap remain unannounced. The Lifetime ISA property price cap of £450,000 applies across England, Scotland, Wales and Northern Ireland, although conveyancing practice and house prices differ between the nations. This article is general information, not personal financial advice — check your own position at gov.uk, or get free help from Citizens Advice or MoneyHelper, before acting on it.
