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June 23, 2026
Lifetime ISAs will be scrapped and a brand new First Time Buyer ISA will be launched to help first time buyers, under plans announced by the government.
The First Time Buyer ISA will replace the existing Lifetime ISA (LISA), which the government has admitted is “not working well” for many first-time buyers, under proposals in a consultation launched on 23 June.
The new ISA is set to launch in April 2028, under the plans.
The LISA was launched in 2017 to help buyers save for their first home by offering a 25% government bonus on savings of up to £4,000 a year.
But it has proved controversial because if you need to withdraw your savings for any other reason than buying a house or for your retirement, as the Treasury Committee said in June 2025, people don’t just lose the government bonus – they’ll lose 6.25% of their own savings too.
Some first time buyers who have been hit by this charge include those wanting to buy a home costing over £450,000, which you’re not allowed to use LISA savings for.
For more information on how Lifetime ISAs currently work and the best rates, read our Best Lifetime ISA guide.
Here are the key differences under the plans we know so far:
Paula Higgins, CEO of HomeOwners Alliance, said: We have been campaigning for some time for the Lifetime ISA withdrawal penalty to be scrapped, so the move towards paying the government bonus only when someone buys their first home is very welcome. It would stop savers being punished for accessing their own money when life takes an unexpected turn.
“Our research shows that 1.9 million aspiring homeowners do not believe they will follow in the footsteps of their homeowning parents. That underlines just how important effective support for first-time buyers is – and why this scheme needs to work for people across the whole country.“
“Removing the upper age limit is also sensible. First-time buyers are getting older, and the current rules are increasingly out of step with today’s housing market.
“But we are alarmed that the £450,000 property price cap may be left untouched. It has not changed since 2017 and is now badly outdated, particularly in London and the South East.
“The whole point of this product is to help first-time buyers across the country. Yet those buying in the most expensive markets arguably need the most support, not a scheme that penalises them for purchasing an average-priced home in their area.
“This is a well-intentioned reform, but unless the cap is reviewed, it risks fixing one unfairness while leaving another firmly in place. The Treasury should update the cap now and future-proof the scheme by ensuring it rises in line with house prices, rather than allowing it to become outdated again.
“First-time buyers need a product designed for the housing market of the future, not one based on prices from nearly a decade ago.”
The government announced in the Budget 2025, that it would publish a consultation in early 2026 on the implementation of a “new, simpler ISA product to support first time buyers to buy a home”
The consultation closes on 17 August 2026. Have your say here or leave your comments below.
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