There’s been a lot of discussion about the future of the Lifetime ISA. Now, that discussion has become official. The government has launched its consultation on a potential new First Time Buyer ISA (FTB ISA). Here’s what’s in scope, what it means for you, and what we’re hoping to see as the outcome – for current and future savers.
Your LISA isn’t going anywhere
The most important thing to say upfront: your Lifetime ISA is here to stay. You can still save up to £4k each tax year and earn the 25% government bonus – up to £1k per tax year. The consultation document confirms that, as long as you’ve opened a LISA by the time the new product is introduced, you’ll still be able to save into it indefinitely under the existing rules, regardless of what any new product looks like.
What the consultation is about
As announced in last year’s Autumn Budget, the government is now officially consulting on a new, standalone product for first-time buyers. It would likely be available from around April 2028, following the consultation and legislative process that follows.
The proposed FTB ISA would be for first-time buyers only – removing the dual home-buying and retirement purpose offered by the Lifetime ISA. The government bonus would be paid when you purchase your home, rather than into your account as you save, which removes the need for a withdrawal charge.
This would mean that savers whose circumstances change could withdraw their money at any time without paying a penalty – they just wouldn’t receive the government bonus.
The new product would be open to anyone aged 18 or over, with no upper age limit – acknowledging that the average age of first-time buyers is rising.
Like the Lifetime ISA, the government would allow providers to offer a Cash and Stocks & Shares version of the product. The overall £20k annual ISA allowance would apply, with the Cash FTB ISA contributing to the £12k Cash ISA limit for under-65s.
Importantly, several key details are still to be confirmed – including the annual allowance, the property price cap, and the level of government bonus offered. These would most likely be announced at the Autumn Budget. The consultation is asking for views on how these should be set, and how the transition from the LISA to any new product should be managed. It’s open until 17th August, and we’ll be actively participating – read our priorities below.
What this means for first-time buyers
If you already have a LISA, the government has stated that you wouldn’t be able to transfer it into the new FTB ISA – ensuring existing LISA holders don’t receive a second government bonus.
However, the consultation proposes that you’d be able to use funds from both your existing LISA and a new FTB ISA towards the same house purchase. The property price cap across both products would be the same, and we’ll be advocating for the government to increase this, in line with house price inflation – as we have done for many years.
In short: your LISA continues to work exactly as it does today. Nothing about your account, your bonus, or your savings plan needs to change.
What this means for retirement savers
The consultation document confirms that if you’re using a Lifetime ISA to save for retirement, you’ll be able to contribute to it indefinitely under the current rules. The proposed new product is for first-time buyers only, so we’ll be advocating for the needs of retirement savers directly in our consultation response.
Our position
As the UK’s biggest provider of Lifetime ISAs, we’re responding formally to the consultation. The LISA has helped over 314,000 people buy their first home since 2017. The issues the government has identified – the withdrawal penalty causing confusion, the dual purpose creating complexity – are real, but solvable.
Replacing the product entirely would create complexity, a lengthy transition period, uncertainty for the millions of people already saving into a LISA, and a gap in support for the self-employed and others who use the LISA as a retirement savings vehicle – a group that a first-time-buyer-only replacement would leave without an equivalent option.
We’re advocating for targeted reforms rather than a wholesale replacement, and we’ll be submitting evidence to support this. We’d like to see:
- An annual review of the property price cap – as the current £450k limit hasn’t kept pace with rising house prices in many parts of the country.
- A reduction in the withdrawal penalty from 25% to 20% – as the current penalty means losing access to your own savings, as well as the government bonus.
- Certainty for existing savers – any transition to a new product should protect the millions of people already using a LISA, without unnecessary disruption.
As Brian Byrnes, our Director of Personal Finance, has said:
“We are left with more questions than answers around how savers will navigate this new product in practice, and the administrative burden placed on providers and conveyancers to ensure compliance in how it has been used is onerous and anti-business.
One of the most valuable features of the Lifetime ISA is the monthly government bonus being added as people save, allowing those funds to start working for customers straight away, creating a powerful and visible reward for positive financial behaviour. Moving to a model where the bonus is only paid at the point of purchase would reduce that benefit and could leave first-time buyers needing to save for longer to reach the same deposit goal.
The current proposal is more complicated, more restrictive and potentially less valuable than the options many savers already have available. We fully support the government’s continued focus on helping first-time buyers overcome the significant challenges of saving for a deposit. However, the more detail about the new product that emerges, the stronger the case becomes for improving the existing Lifetime ISA rather than replacing it with something demonstrably inferior.”
We’ll share our formal response and keep you updated as the consultation progresses.
What about the Cash ISA changes?
Separately, the government has now confirmed that the Cash ISA allowance for under-65s will be reduced from £20k to £12k from April 2027. They also announced new rules limiting transfers, and a new 22% tax on interest earned on uninvested cash inside Stocks & Shares ISAs.
Read our full guide to those proposed changes and what they could mean for your savings and investments.
A 25% government penalty applies if you withdraw money from a Lifetime ISA for any reason other than buying your first home (up to £450k) or for retirement, and you may get back less than you paid into your Lifetime ISA.
Tax treatment depends on individual circumstances and may be subject to change in the future. It’s important to consider your personal circumstances and the relevant pros and cons offered by each type of account.