First-Time Buyer ISA to Replace the Lifetime ISA: What You Need to Know

Saving for your first home could look very different in the next few years. On 23 June 2026, the Government launched a consultation on a new First-Time Buyer ISA, a proposed savings account that would eventually replace the Lifetime ISA for new first-time buyer saving.

The consultation forms part of a wider package of ISA reforms announced in the 2025 Autumn Budget. While the proposal aims to simplify saving for a first home, many of the key details are still being consulted on, meaning the final product could change before it is introduced.

The Lifetime ISA has been available since 2017 and allows people aged 18 to 39 to save up to £4,000 a year, with the Government adding a 25% bonus of up to £1,000 annually. The money can be used towards buying a first home or withdrawn from age 60 for retirement. However, taking money out for other reasons usually results in a withdrawal charge, a feature that has been widely criticised.

Under the proposals, the new First-Time Buyer ISA would focus solely on helping people buy their first home. Unlike the Lifetime ISA, it would have no upper age limit for opening an account, and the current withdrawal penalty would be removed. Instead of receiving a government bonus as you save, the bonus would be paid when the money is used to purchase a qualifying property. The exact bonus rate, annual contribution limit and property price cap have not yet been confirmed.

The changes would not affect existing Lifetime ISA holders immediately. The Government has proposed that anyone who already has a Lifetime ISA will be able to continue using it under the current rules, while the new account would eventually be offered instead of the Lifetime ISA for new savers. The consultation also indicates that Lifetime ISA savings will not be transferable into the new First-Time Buyer ISA.

The consultation is open until 18 August 2026, with the Government expected to consider feedback before introducing legislation. Current proposals indicate the new account would be introduced from April 2028, although this timetable could still change.

For anyone planning to buy their first home, the announcement is a reminder that savings products can evolve over time. While the direction of travel is now clearer, many of the rules are still being decided, so it's worth keeping an eye on how the consultation develops before assuming the final product will look exactly as proposed.