The promised consultation on the implementation of a replacement to Lifetime ISAs (LISAs) has been published outlining plans to introduce a First Time Buyer ISA (FTBISA).
In the Autumn 2025 budget the government announced it would be replacing the LISA after both the Financial Conduct Authority (FCA) and Treasury Select Committee (TSC) identified flaws with the product around the impact of withdrawal fees. The TSC also noted “when it comes to encouraging long-term retirement savings, the LISA may be diverting people from saving into pension products that may be a more appropriate for them.”
The First Time Buyer ISA consultation outlines how the FTB ISA will be solely for the purpose of purchasing first time buyer homes and will include a government bonus paid at the point an individual makes a withdrawal for purchasing their first home. It goes on to explain: “People saving for their first home through the FTB ISA will be able to save up to a certain limit a year, which will count towards their ISA allowance. It can be put towards any home in the UK valued up to a set price cap and purchased with a legal mortgage.” No defined price cap has been set in the consultation. The current cap for LISAs is £450,000.
Once available, this new product will be offered in place of the LISA, with both a cash and stocks and shares version. It will remain possible to open a Lifetime ISA until the new product becomes available and for account holders to continue to save into their Lifetime ISA in line with the existing rules indefinitely. Transfers of Help to Buy ISAs to the new FTB ISA will be allowed but LISAs will not be eligible for transfer. Both LISAs and the FTB ISA can be used towards the same purchase.
The consultation provides no detail on subscription limits, property price caps and the level of the government bonus which will be announced at a future date. It does however place the onus on conveyancer “for ensuring compliance, as they will have access to all the relevant information, including the mortgage offer, proof of funds and confirmation of the buyer’s legal status, such as whether they’re a first time buyer.”
Conveyancers will be required to complete a “Conveyancers Declaration Form” confirming the individual and property are eligible for the bonus, funds are being used exclusively towards the purchase and the purchase is being made alongside a mortgage. An Investor Declaration Form must also be completed by the individual confirming they meet the eligibility criteria, such as having a mortgage and using the property as their main residence. Importantly, and unlike the LISA, the bonus will be paid at exchange, so withdrawal before then won’t incur a penalty.
Welcoming the consultation 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 Higgins flagged questions remained over the as yet to be announced price cap, which if it followed the current LISA cap could leave parts of the country unsupported, particularly 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.”
