First time buyer ISA: what the government has proposed

What has the government announced?

On 22 June 2026, HM Treasury opened a consultation on a new First Time Buyer ISA (FTB ISA), inviting views until 18 August 2026. The consultation has now closed. Its stated aim is to design a simpler ISA to help people save for a first home, offered in place of the Lifetime ISA once it is ready. Nothing has been legislated yet: this is a consultation on design, not a confirmed product, and the government has not yet published its response to it.

Until the new account exists, the Lifetime ISA carries on exactly as it does today. HM Treasury has said explicitly that it will remain possible to open a Lifetime ISA, and to keep saving into one under the existing rules, indefinitely, while the FTB ISA is designed.

Why is the government replacing the Lifetime ISA?

HM Treasury’s consultation sets out why it thinks the Lifetime ISA needs replacing. The scheme launched in 2017, and the number of savers making an unauthorised withdrawal, one that triggers the 25% charge, has been rising: it reached 8% of all accounts opened in 2024/25. Overall, more Lifetime ISA holders have lost part of their own savings to the charge than have used the account to buy a first home.

A 2025 report from the Treasury Select Committee concluded that the product’s design was flawed. It pointed to two problems in particular: the dual purpose of saving for a home or for retirement in the same account risks people choosing the wrong strategy for what they actually need, and the withdrawal charge causes confusion, costing people money when their circumstances change unexpectedly. HMRC’s own research backs this up, finding that awareness of the withdrawal rules is low, and that people who make an unauthorised withdrawal often do so because of financial difficulty, such as unemployment or debt.

The committee also questioned whether a Lifetime ISA is an efficient way to save for retirement compared with a pension, given employer contributions and pension tax relief play no part in it. For how the two compare, see our ISA versus pension article.

As of 2024/25, 314,600 savers have used a Lifetime ISA to buy their first home, according to the consultation document.

How would the First Time Buyer ISA work?

The core change is when the bonus is paid. Rather than adding a 25% bonus to your savings as you pay in, as the Lifetime ISA does, the FTB ISA would pay its bonus only when you withdraw money to buy your first home. Because the bonus is not paid upfront, there is nothing to claw back if your plans change, so the consultation proposes no withdrawal charge at all, unlike the Lifetime ISA’s 25%.

Other proposed features:

• Open to UK residents aged 18 or over, with no upper age limit, buying with a legal mortgage.
• Both cash and Stocks and Shares versions are intended to be available, similar to a Lifetime ISA today.
• The bonus would only become available once the account has been open for a year, echoing the Lifetime ISA’s 12-month rule.
• The bonus would be calculated on your net subscriptions, what you have paid in minus any withdrawals, not on any investment growth.
• As with a Lifetime ISA purchase, the bonus would depend on completing within 90 days of the conveyancer receiving the funds. If a sale fell through or missed that window, the conveyancer would return the money and bonus rather than you losing it, and you would keep your right to claim the bonus on a future purchase.
• The bonus would not be available for cash-only purchases or informal lending arrangements, only for a purchase with a mortgage.

What would the limit, bonus and price cap be?

Not yet decided. The annual subscription limit, the bonus percentage and the property price cap are all, in the government’s own words, to be confirmed at a future fiscal event. The consultation does say the price cap will eventually be aligned across the FTB ISA, the Lifetime ISA and the Help to Buy ISA, whatever level it is set at, so that no one loses out by comparison.

There is no proposed limit on how much you could subscribe to an FTB ISA over your lifetime, though the consultation does ask whether the bonus itself should carry a separate lifetime cap. Both of those questions, along with the exact split between limit, price cap and bonus rate, are still open for the government to decide once it has reviewed responses.

Does it cover the whole UK, including Scotland?

On the wording published, yes. The consultation describes the FTB ISA as being for UK residents and usable towards any home in the UK, rather than being limited to England. It does not single out Scotland, Wales or Northern Ireland for different treatment, so the proposal as published is a UK-wide one, in the same way the Lifetime ISA is today.

What would it mean for your existing Lifetime ISA?

If you already hold a Lifetime ISA, the consultation is clear on a few points, even though the wider design is not finalised:

• You would not be able to transfer money from a Lifetime ISA into a new FTB ISA, since you have already received a bonus on it and transferring would mean claiming a second one on the same money.
• You could hold both a Lifetime ISA and an FTB ISA at the same time.
• You could put funds from both accounts towards the same first home.
• You could only pay new money into one of the two, Lifetime ISA or FTB ISA, in the same tax year, mirroring the existing rule that limits you to one Lifetime ISA subscription a year.

The government is also proposing that people who hold a Help to Buy ISA, a related but separate, older scheme, could transfer those savings into an FTB ISA. That is one of the points still open to consultation, not a decision. For how Help to Buy ISAs work today, see our Help to Buy ISA guide.

How does the Lifetime ISA work today?

Until the FTB ISA exists, this is what applies. For the complete rules on opening and paying into one, see our Lifetime ISA guide.

The Lifetime ISA today

Who can open one

Aged 18 to 39

Contributions and bonus continue until 50

Annual limit

£4,000

Counts inside the £20,000 overall ISA allowance

Government bonus

25%

Up to £1,000 a year

First home price cap

£450,000

Anywhere in the UK

Minimum holding period

12 months

From first payment to buying

Charge on other withdrawals

25%

Before age 60, outside a first home purchase

You can hold a Lifetime ISA in cash, in Stocks and Shares, or a mix of both, and the £4,000 limit sits inside your overall £20,000 annual ISA allowance for 2026/27. HM Treasury has said the Lifetime ISA limit stays the same when the new Cash ISA limit arrives on 6 April 2027. For the full rules on withdrawing, including exactly when the 25% charge applies and when it does not, see our guide to the Lifetime ISA withdrawal penalty, or try the Lifetime ISA calculator to see what the bonus is worth on your own numbers.

When will the First Time Buyer ISA launch?

There is no confirmed date. The consultation closed on 18 August 2026, and the government has said it will set the subscription limit, bonus rate and price cap at a future fiscal event, without naming one. Some commentators have suggested a launch around 2028, but that date does not appear in the consultation document itself and has not been confirmed by gov.uk. Treat any specific launch year you see elsewhere as speculation until the government publishes its formal response.

What can first-time buyers do meanwhile?

Nothing about your options today has changed. A few things worth weighing up, not a recommendation:

• If you are eligible and a Lifetime ISA suits how soon you plan to buy, you can still open and pay into one under the current rules: bonus paid as you save, 25% charge if you withdraw for another reason. Our withdrawal penalty guide covers exactly when that charge does and does not apply.
• If the withdrawal charge is what is putting you off, that is precisely the problem the FTB ISA is designed to fix, so some people may prefer to see the final design before committing large sums. That depends on how soon you plan to buy.
• If you are saving for a home that is still some years away, or you are not sure a Lifetime ISA fits your situation, MoneyHelper offers free, independent guidance on savings options.