CEO, The Savvy Investor Limited · Investment Educator
Published: 24 June 2026 · Updated: 28 October 2026 · Reading time: 8 minutes
What’s changed: Updated 28 October 2026: the government’s response, published with the Budget, confirms the final design and an April 2029 launch, and the article has been rewritten to match. Earlier, 20 August: the consultation closed. Full update history.
⚠️ Important: This article provides educational information for UK residents and is not personalised financial advice. It explains a product the government has confirmed but not yet legislated. ISA rules are based on current 2026/27 legislation and announced plans that may change. Consider speaking to an FCA-authorised adviser before making decisions about your savings.
The Lifetime ISA has a replacement and a date. The First Time Buyer ISA opens in April 2029 and will, in the government’s words, be offered “in place of the Lifetime ISA”. The design was settled in the government’s response to its summer consultation, published alongside the Budget on 28 October 2026. It keeps the Lifetime ISA’s 25% bonus, £4,000 annual limit and £450,000 property price cap, but pays the bonus when you buy and drops the upper age limit. If you hold a Lifetime ISA, or you were about to open one, here is what has been decided and what it means for you.
The short version
- The First Time Buyer ISA launches in April 2029 and replaces the Lifetime ISA for new savers. June’s coverage of the consultation pointed to April 2028. The government has chosen a year later.
- It keeps a 25% government bonus, now worked out on the final account balance and paid when you buy, up to a maximum bonus of £20,000.
- You can pay in up to £4,000 a year, the property price cap stays at £450,000, and there is no upper age limit. Cash and stocks and shares versions will both be offered.
- There is no withdrawal charge on the new product, because the bonus is only added at the point of purchase.
- If you already hold a Lifetime ISA, you can keep using it under the current rules. You cannot transfer it into the new product, but you can use both towards the same home.
- From 29 October 2026, the Lifetime ISA withdrawal charge falls from 25% to 20% when the money goes towards a first home costing more than £450,000.
What the government announced
The Lifetime ISA was always two products wearing one wrapper: a first-home savings account and a retirement pot. Both came with a 25% government bonus, but also with rules that aged badly. The 25% withdrawal charge on any non-qualifying withdrawal takes back more than the bonus, costing you 6.25% of your own money. The £450,000 property price cap has been frozen since 2017, which increasingly shuts out buyers in London and the South East, the very places where help is most needed. And you have to open one before your 40th birthday. The Treasury Select Committee went as far as calling the LISA “not fit for purpose”.
The government consulted on a replacement from June to August 2026, confirming that “once available this new product will be offered in place of the Lifetime ISA”. Its response came on Budget day, 28 October 2026: “The Government will introduce a new First Time Buyer ISA from April 2029.” It says the timing “reflects the ongoing transformation in the ISA landscape and the time it takes industry and government to prepare for a new product”. Several respondents to the consultation had suggested April 2028 as the earliest viable launch for the whole industry. Primary and secondary legislation will be passed before launch.
How the First Time Buyer ISA differs from the LISA
The final design keeps the Lifetime ISA’s headline numbers and changes how, and when, the bonus is paid. Here is how the two compare.
| Feature | Lifetime ISA (current) | First Time Buyer ISA (from April 2029) |
|---|---|---|
| Who can open it | Ages 18 to 39 only | 18 or over, no upper age limit |
| Annual limit | £4,000 | £4,000 |
| Bonus | 25%, paid monthly on your contributions | 25% of the final balance, paid when you buy, up to £20,000 |
| Property price cap | £450,000 | £450,000 |
| Penalty for other withdrawals | 25% charge (a 6.25% loss on your own money) | No withdrawal charge |
| Account types | Cash or stocks and shares | Cash and stocks and shares |
| Retirement use | Yes, tax-free from age 60 | No; first home only |
| Transfer in a Help to Buy ISA | Yes | Yes, the full balance, outside the annual limit, from 6 April 2029 to 1 December 2030 |
The bonus is the biggest change. It is calculated on the account’s final balance, not just on what you paid in, which the government says “will ensure that any investment or interest growth within the account is recognised when the bonus is calculated.” It is paid at exchange of contracts, and you have 90 days from claiming it to complete the purchase. To qualify, the account must have been open for a year and the purchase must use a mortgage. You can hold only one First Time Buyer ISA at a time, and money paid in counts towards your overall £20,000 ISA allowance.
Because the bonus is only added at purchase, there is nothing to claw back if you take the money out for something else, so the new product has no withdrawal charge. That removes the feature that caused the most harm in the Lifetime ISA, the one that quietly punished savers who needed their money back for an emergency. The trade-off is that the new product has no retirement option, so it is a first-home tool only.
The three open questions, now settled
When the consultation opened, three numbers were undecided. The government’s response settles all three, and in each case it keeps the Lifetime ISA’s figure.
- The bonus rate stays at 25%, with a new lifetime maximum bonus of £20,000.
- The property price cap stays at £450,000. The government considered calls to raise, index, regionalise or remove it, but says the cap helps target support “towards typical first-time buyers while ensuring the scheme remains fiscally sustainable.” The same cap applies to the Lifetime ISA and the new product.
- The annual limit stays at £4,000, with no limit on total subscriptions over your lifetime.
So the new product is simpler and more flexible than the Lifetime ISA, but on these three numbers it is no more generous.
If you already have a Lifetime ISA
The most important point for existing savers is the calmest one: nothing changes for you right now. Your Lifetime ISA stays open, you can carry on paying in up to £4,000 a year, you keep earning the 25% bonus, and both uses, a first home up to £450,000 and tax-free access from age 60, continue under the current rules. Any bonuses you have already received are yours.
The government says Lifetime ISAs opened before the new product arrives can “continue under existing terms”. You will not be able to transfer a Lifetime ISA into a First Time Buyer ISA, which the government says is to avoid paying two bonuses on the same money, but you will be able to use both products towards the same purchase. The government’s design summary also allows subscriptions into one account per tax year, counting a Lifetime ISA or a First Time Buyer ISA.
One change applies straight away. From 29 October 2026, if you use Lifetime ISA money towards a first home that costs more than £450,000 and the purchase otherwise meets the rules, the withdrawal charge is 20% instead of 25%. The government says this “will recover the government bonus while allowing savers to retain their own contributions.” Other unauthorised withdrawals are still charged at 25%. If you want a full refresher on how your LISA works while it remains in place, our complete Lifetime ISA guide covers the bonus, the penalty and the £450,000 cap in detail.
If you were about to open a LISA
The Lifetime ISA is still open to new savers, and the replacement does not arrive until April 2029, so one opened today still earns the 25% bonus in the meantime. You will not be forced to move when the new product arrives. The questions worth thinking through are the same ones that have always applied to the LISA: are you confident of buying a first home at £450,000 or less, and are you comfortable that the money is for a home or for retirement from 60, given the penalty on other withdrawals.
If your main goal is retirement rather than a first home, the decision is unchanged by this announcement: for most employed and higher-rate taxpayers a pension still tends to beat a LISA, a comparison we set out in full in our ISA versus SIPP guide. None of this is a recommendation; it depends on your own circumstances.
The timeline
- 23 June 2026: the First Time Buyer ISA consultation is published.
- 18 August 2026: the consultation closed to responses.
- 28 October 2026: the government publishes its response with the Budget, setting the final design.
- 29 October 2026: the Lifetime ISA withdrawal charge for homes above £450,000 falls to 20%.
- 6 April 2029: the First Time Buyer ISA launches, offered in place of the Lifetime ISA, and Help to Buy ISA holders can start transferring in.
- 1 December 2030: the Help to Buy ISA is due to close, ending the transfer window.
Frequently asked questions
Is the Lifetime ISA being scrapped?
Not for existing savers. The First Time Buyer ISA replaces it for new savers from April 2029, and Lifetime ISAs opened before then continue under the current rules.
Will I lose my government bonus?
No. Bonuses you have already earned are yours, and you continue to earn the 25% bonus on new contributions while your Lifetime ISA remains open under the current rules.
Can I open the First Time Buyer ISA now?
No. It launches in April 2029. Until then, the Lifetime ISA is the product available to new first-time-buyer savers.
Can I move my Lifetime ISA into the new product?
No. The government will not allow transfers from a Lifetime ISA to a First Time Buyer ISA, to avoid duplicate bonuses, but you can use both towards the same purchase. Help to Buy ISA holders can transfer their full balance between 6 April 2029 and 1 December 2030.
Should I still open a Lifetime ISA?
The LISA remains open and still pays the 25% bonus, so for some first-time buyers it is still worth using in the meantime. Whether it suits you depends on your plans, in particular the £450,000 cap and the penalty on non-qualifying withdrawals. This is general information, not advice.
Does this change the retirement use of a Lifetime ISA?
The replacement is for first homes only, so the retirement route is not being carried into the new product. Your existing Lifetime ISA keeps its tax-free access from age 60 under the current rules.
The Savvy Investor’s take
The Lifetime ISA’s flaws were never a secret. The 25% charge punished savers for needing their own money back, and the frozen £450,000 cap quietly excluded the buyers it was meant to help. A first-home product that pays the bonus at purchase, scraps the penalty and drops the age limit is a sensible redesign.
What the government did not change is just as telling. The bonus stays at 25%, the annual limit at £4,000 and the price cap at £450,000, so buyers in higher-priced areas get a smaller charge on the Lifetime ISA rather than a higher cap. The new product is simpler, not more generous, and it is still two and a half years away.
This article is general information about a government savings product and is not financial advice. The First Time Buyer ISA has been confirmed by the government but still needs legislation, and its features may change. Whether a Lifetime ISA or any savings product suits you depends on your own circumstances. For regulated advice, speak to a financial adviser authorised by the Financial Conduct Authority. Savvy Investor Guide is not authorised or regulated by the FCA.
Key sources
- HM Treasury, First Time Buyer ISA Consultation: Government Response (October 2026)
- HM Treasury, Budget 2026 (28 October 2026)
- GOV.UK, First Time Buyer ISA consultation (published 23 June 2026)
- MoneySavingExpert, Lifetime ISA and First Time Buyer ISA update (23 June 2026)
- Mortgage Solutions, Government proposes FTB ISA in light of “flawed” LISA (23 June 2026)
Update history: 28 October back to 20 August 2026
Update, 28 October 2026: The government published its response to the consultation alongside the Budget, and the article now carries the final design: a launch in April 2029, a 25% bonus on the final balance up to £20,000, a £4,000 annual limit, the £450,000 cap retained, no transfers from a Lifetime ISA, Help to Buy ISA transfers from 6 April 2029 to 1 December 2030, and a 20% Lifetime ISA charge for homes above the cap from 29 October 2026. A correction: this article said the new product was expected “around April 2028”, citing coverage at the time. The government has set April 2029. The note of 20 August below, which repeated the April 2028 expectation, has moved here from the top of the article unchanged.
Update, 20 August 2026: the consultation has closed. HM Treasury’s page now records that “This consultation ran from 10am on 22 June 2026 to 11:59pm on 18 August 2026”. It is closed to responses and the government is analysing feedback; no formal response has been published yet, and the page says only to check back for the outcome.
A correction to this article, made in the same edit. The closing date was given here as 17 August 2026 in three places. The correct date is 18 August 2026, per the consultation page itself. Nothing else in the analysis depended on it, and the April 2028 launch expectation is unaffected.
What happens next is the government response, which will settle the three things the sections below flag as still open: the bonus rate, the property price cap, and the annual contribution limit. Until that is published, everything about the product’s final shape remains a proposal. If you hold a Lifetime ISA, nothing has changed for you.