Published 16 July 2026

A New First Time Buyer ISA May Replace the Current Lifetime ISA

a stack of coins on top of plans for a house

The way first-time buyers save for a home could be changing soon. The government has launched a consultation that proposes a replacement of the current savings vehicle for first-time buyers, the Lifetime ISA, with a new First Time Buyer ISA (FTB ISA).

We’ve rounded up everything we know so far below.

What is a Lifetime ISA & How Does it Work?

The current Lifetime ISA (Individual Savings Account/LISA) is a savings vehicle designed to help first-time buyers purchase their first home, and/or help those who want to save for later life/retirement.

At the moment, it works like this:

You must be 18 or over, but under 40, to open a LISA. To open and continue to pay into a LISA, you must also be either:
- A resident in the UK, or
- A member of the armed forces or a Crown servant (e.g. diplomatic or overseas Civil Service) or their spouse or civil partner if you do not live in the UK.
You can put in up to £4,000 per year, until you’re 50.
You must make your first payment into your ISA before you’re 40.
The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.
If you withdraw from the LISA or transfer the funds to another type of ISA before you turn 60, you’ll have to pay the 25% bonus back.
The £4,000 limit counts towards your annual ISA limit, which is £20,000 for the 2026 to 2027 tax year.
You can hold cash or stocks and shares in your LISA or have a combination of both.
When you turn 50, you won’t be able to pay into your LISA or earn the 25% bonus, but your account will stay open and your savings will still earn interest or investment returns.

You can learn how withdrawing money from your LISA works on the government website.

If the Proposal Goes Ahead, How Will the New First Time Buyer ISA Work?

Here’s what the government’s proposed changes are at the moment (please note: these are subject to change):

It will only be for first-time buyers, not for retirement savings.
Existing LISAs will stay open until the new First Time Buyer (FTB) ISA is launched, and will continue indefinitely if opened in time.
Contributions into the FTB ISA will be eligible for a bonus paid at the point an individual makes a withdrawal for purchasing their first home, but the level of this bonus has not been confirmed yet.
The bonus will be paid at the exchange stage (of purchasing a property), so if you withdraw from the ISA before then, you won’t be charged.
There will be cash and stocks and shares versions.
Help to Buy ISAs can be transferred into the new FTB ISA but LISAs can’t be transferred into it (as they already have the bonus).
Property prices will be capped, but we don’t know at what level yet.
The government will align the FTB ISA’s property threshold with LISAs and Help to Buy ISAs (only likely to happen if the new threshold is over £450,000).
The property threshold may rise in line with inflation, but this has not been confirmed yet.
There is no set date for the launch of the FTB ISA yet.

Read the full consultation.

Why is a New First Time Buyer ISA Being Proposed?

Lifetime ISAs have been under criticism since they were introduced in 2017. With a £450,000 property limit and an expensive early withdrawal penalty (25%), some cautious savers have either been excluded or unfairly charged as housing costs and personal circumstances change.

Additionally, the current Lifetime ISA tries to balance saving for a first home and retirement, which has made it confusing for some. The government has said they want to make things simpler and fairer for first-time buyers.

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