Measure
The government will introduce a new First Time Buyer (FTB) ISA from April 2029, replacing the existing Lifetime ISA (LISA) for new savers. As with the LISA, the new ISA will have a £4,000 annual contribution limit and offer a 25% government bonus on the final balance, capped at £20,000, when purchasing a first home worth up to £450,000. Unlike the LISA, there will be no retirement bonus or withdrawal charge, and there will be no upper age limit. Existing LISA holders can continue saving under current rules, while the withdrawal charge for purchases above £450,000 will fall from 25% to 20% from 29 October 2026.
Prospective first-time buyers saving for a deposit, including those excluded from opening a LISA by its upper age limit. Existing LISA holders can continue using their accounts, including for retirement, while those purchasing a first home above £450,000 will benefit from the reduced withdrawal charge where the other qualifying conditions are met.
The FTB ISA will launch from April 2029. Until then, eligible savers can still open a LISA. The reduced withdrawal charge for existing LISA holders buying a first home above £450,000 applies to withdrawals on or after 29 October 2026.
Removing the withdrawal charge from the new product addresses a frequently criticised feature of the LISA: non-qualifying withdrawals can currently claw back more than the government bonus. Paying the FTB ISA bonus only when a qualifying home is purchased allows savers to access their own funds for other purposes without this charge. Reducing the LISA charge to 20% for purchases above £450,000 removes the additional penalty on savers’ own contributions, although the government bonus can still be lost.
Removing the upper age limit is a sensible simplification and extends support to older first-time buyers. Preserving existing LISAs also means current holders can retain their retirement savings option rather than being required to move to a product focused solely on home purchase.
The £4,000 annual contribution limit and 25% bonus rate are retained, but the new £20,000 bonus cap and payment at purchase change how support accumulates. Although the FTB ISA bonus will include interest or investment growth in its calculation, savers will not earn returns on government bonuses during the saving period as they can under a LISA. Retaining the £450,000 property price cap will continue to exclude purchases above that level. The new product will not provide a retirement bonus for new savers, including self-employed individuals who might otherwise have used a LISA for later-life saving.