Buying a home can take years of saving and may even require support from parents or grandparents. This often makes it quite challenging for younger people to get onto the property ladder.

Now, however, the government is set to introduce a new “First-Time Buyer ISA” from April 2029 designed to help people build a deposit for their first home.

The account will replace the Lifetime ISA (LISA) as the main government-supported ISA for first-time buyers.

Continue reading to discover why the government wants to introduce the new First-Time Buyer ISA and what the plans could mean if you already have a LISA. 

The government claims the Lifetime ISA isn’t working well for everyone

The LISA currently allows eligible savers to contribute up to £4,000 each tax year and receive a 25% government bonus, worth up to £1,000 annually. 

You could then use this money to buy a first home worth up to £450,000 (as of 2026/27) or access it for retirement from age 60. 

However, withdrawing money for most other reasons typically results in a 25% withdrawal charge.

You will incur a Lifetime ISA government withdrawal charge (currently 25%) if you transfer the funds to a different ISA or withdraw the funds before age 60 and you may therefore get back less than you paid into a Lifetime ISA.

By saving in a Lifetime ISA instead of enrolling in, or contributing to an auto-enrolment pension scheme, occupational pension scheme, or personal pension scheme:

  • You may lose the benefit of contributions from your employer (if any) to that scheme
  • Your current and future entitlement to means tested benefits (if any) may be affected.

Following a consultation, the government website states that unauthorised withdrawal charges affected the equivalent of 8% of all LISA accounts opened in 2024/25. 

It also says more LISA holders lost part of their original savings through withdrawals than used their accounts to purchase a home.

The First-Time Buyer ISA is intended to simplify everything by allowing you to use it only to buy a first home, not for retirement.

It’s essential to remember that the First-Time Buyer ISA rules could change in the future. 

You would need to be a first-time buyer aged 18 or over and you would still benefit from a bonus

Under the current proposals, the new ISA will be available to any UK residents aged 18 or over who are saving for their first home.

Currently, you need to make your first LISA payment before turning 40 and can only continue contributing until age 50. There won’t be an upper age limit with the First-Time Buyer ISA.

This could make the account more practical for people who buy their first home later in life and can’t currently open a LISA.

The main pull of a First-Time Buyer ISA is likely to be the government bonus. 

Each tax year, aspiring first-time buyers will be able to contribute £4,000 to the new ISA and benefit from a 25% government bonus, up to a maximum of £20,000. 

When the bonus is paid will differ from the LISA. Those using a LISA receive the bonus the month after contributions are made, which potentially allows them to benefit from interest or investment returns on the bonus. It’s important to note that investment returns cannot be guaranteed and you may get back less than you paid in. 

In contrast, users of the First-Time Buyer ISA will receive the bonus when the funds are withdrawn for a qualifying home purchase. 

Importantly, the bonus would be based on your net contributions, meaning what you’ve paid into the account minus any previous withdrawals, rather than investment growth or interest.

You would be able to withdraw your savings without a penalty

One of the main concerns with the LISA was the 25% early withdrawal charge, as it meant you could receive less than you originally contributed.

In the 2026 Budget, the government confirmed that there will be no withdrawal charge on the First-Time Buyer ISA.

If your circumstances changed suddenly, you could withdraw your own savings, together with any interest or investment growth, without a penalty. 

Just note that withdrawing money could still reduce the net contributions used to calculate your eventual government bonus.

Still, this could give you more flexibility if your plans change before you’re ready to buy.

Other confirmed details about the First-Time Buyer ISA 

Similar to the Lifetime ISA, the government has proposed offering both Cash and Stocks and Shares versions of the account, which will allow users to decide whether to save or invest their money. 

There will be a property price cap when using a First-Time Buyer ISA of £450,000. If the value of the property you purchase exceeds £450,000, you will not receive the government bonus. 

Lifetime ISAs will remain available until the new account launches 

If you already have a LISA, it’s important to note that the proposed changes don’t mean you need to close it.

Indeed, the government has confirmed that you can continue to open and hold a LISA until the First-Time Buyer ISA becomes available.

You’ll also be able to continue using your existing LISA even after it stops being offered.

When the new account launches, you will usually not be able to directly transfer funds from a LISA to a First-Time Buyer ISA since your LISA savings have already benefited from the government bonus.

Get in touch

We can keep you updated on any changes to ISAs as we help you work towards your long-term goals.

Please get in touch today to find out more about how we can support you.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Approver Quilter Financial Services Limited.  21/10/2026