One of the biggest struggles for first-time buyers is saving an adequate deposit. To help aspiring homeowners get a foot on the property ladder, the government has proposed a new First Time Buyer ISA.
The consultation for this was launched on 23rd June 2026 and the intention is to introduce a simpler ISA that supports those saving to buy their first home. It is intended to replace the Lifetime ISA (LISA), although some details have yet to be decided before its release date is announced. So what are the proposed features of this new ISA and how will they compare with the current LISA?
What does the existing Lifetime ISA offer?
You can open a LISA when you’re aged 18 to 39 and you need to make your first deposit in the account before you reach 40. It’s designed to help you save for your first home or to have access to extra funds for your retirement. You can save without being taxed on the interest you earn and you can also benefit from a government bonus each tax year.
You can save up to £4,000 per tax year and get a bonus from the government of 25%. So, if you save the full £4,000 in a year, you’ll receive an additional £1,000. You can continue making payments into your LISA and receiving the government bonus until you’re 50. Over the lifetime of your LISA, the maximum bonus you can receive is £32,000.
You can withdraw money from your LISA to buy your first home, which can have a maximum value of £450,000, or when you’ve reached 60, without being penalised. However, if you make withdrawals for any other reason, you’ll be penalised with a 25% withdrawal charge.
Why has the First Time Buyer ISA been proposed?
The LISA has come under a lot of criticism over the years, which has led to the proposal of the new First Time Buyer ISA. People are buying their first homes much later in life and the upper age limit of the LISA excludes many first-time buyers who fall outside the scheme’s age eligibility.
The property price cap also hasn’t been reviewed since the LISA was first introduced in April 2017. This is very outdated compared with current market prices, especially those in more expensive areas, such as London and the South East. As a result, first-time buyers who’ve saved consistently have found themselves unable to use the funds in their LISA unless they pay a penalty fee.
The 25% withdrawal fee has also been a cause for criticism. Savers whose financial circumstances have unexpectedly changed have needed to use their savings but then been penalised with a hefty fee for making an unauthorised withdrawal. With the current cost of living crisis, savers need more flexibility to allow for their changing circumstances.
The proposed features for the First Time Buyer ISA
The First Time Buyer ISA (FTB ISA) is expected to provide greater flexibility for savers, with its sole purpose being to help first-time buyers get on the property ladder. The proposed features include:
- Solely for first-time buyers: The dual retirement-saving option that’s available with the LISA is to be removed for the FTB ISA.
- No upper age restriction for opening an account: An account will be available to anyone aged 18 or over. There won’t be a maximum age limit to apply for an account as there is with the LISA.
- No maximum age limit for contributions: There will be no cut-off age for making contributions so you can still add to your savings until you’re ready to buy your first home.
- No penalty withdrawals: You will be able to withdraw funds from your account without being penalised if your circumstances change.
- The bonus is paid upon purchase: Rather than receiving a bonus each tax year, the government bonus will be paid when you buy your property.
When will the First Time Buyer ISA be available?
A launch date for the FTB ISA hasn’t been released yet. Certain specifics are still to be decided, such as the property price cap, the annual savings limit and the government’s bonus contribution.
Will you still be able to use your LISA?
Yes, if you already have a LISA or open one before the new FTB ISA is launched, you can continue to save into it. You will be able to hold a FTB ISA at the same time as your LISA and use the funds from both towards buying your first home. You won’t, however, be able to transfer funds from your LISA to your FTB ISA. Instead, you’ll need to choose which one of the two you wish to save into each tax year.
Get help with buying your first home
As well as the current and proposed ISAs, there are various government-backed schemes that are designed to help you get on the property ladder. Our mortgage brokers can check your eligibility and give you the details of the schemes you can take advantage of. Give us a call on 01322 907 000 and discover the help that’s available to you.