A Lifetime ISA (LISA) has long been one of the UK’s most generous savings products, helping eligible adults save for their first home or retirement with a 25% government bonus on top of their own contributions.
That’s now changing. On 23 June 2026, the Treasury published a consultation confirming plans to replace the Lifetime ISA with a new First Time Buyer ISA (FTB ISA). The consultation runs until 18 August 2026, and if the plans go ahead, the new product isn’t expected to launch until April 2028.
The good news for anyone with a LISA already: there’s no cut-off. The consultation document itself confirms that it will remain possible to open a Lifetime ISA until the new product becomes available, and that existing account holders can keep saving into their LISA under the current rules indefinitely, even after the First Time Buyer ISA launches. So opening or keeping a LISA now doesn’t put you on a countdown; your account carries on exactly as it does today, for as long as you want to use it.
This guide covers how the Lifetime ISA works today, what’s proposed for its replacement, and what it means depending on your situation.
How a Lifetime ISA Works Today
- Open one if you’re aged 18–39.
- Save up to £4,000 per tax year.
- Get a 25% government bonus on contributions, up to £1,000 a year.
- Contributions and bonuses can continue until you turn 50.
- Use the money to buy a first home, or withdraw from age 60 for retirement.
Example: Save £4,000 in a tax year, and the government adds £1,000, giving a £5,000 total before any interest or investment growth.
Using a LISA to Buy Your First Home
To withdraw penalty-free for a house purchase, you must:
- Be a first-time buyer (never owned property anywhere, including overseas or a share of one).
- Have held the account for at least 12 months.
- Buy a qualifying property costing £450,000 or less.
- Buy using a residential mortgage, via a solicitor or conveyancer.
Using a LISA for Retirement
You can withdraw your savings, bonus included, from age 60 without a penalty. Many people use a LISA alongside a workplace pension to top up retirement savings.
The Withdrawal Penalty
Withdraw for any reason other than a first home or after age 60, and you’ll normally pay a 25% withdrawal charge. Because this is calculated on the full withdrawal (not just the bonus), it can eat into your own savings: one of the most criticised features of the scheme, and a key reason it’s being replaced.
What’s Proposed: The First Time Buyer ISA
Here’s how the proposed replacement compares to today’s Lifetime ISA:Lifetime ISA (current)First Time Buyer ISA (proposed)Purpose First home or retirement First home only, retirement use removed Age to open 18–39 18+, no upper limit Bonus 25%, paid as you contribute 25%*, paid as a lump sum when you complete on a home Withdrawal penalty 25% charge outside qualifying use Removed: you can withdraw your own contributions penalty-free, but forfeit the bonus on withdrawn amounts Property price cap £450,000 Under review, not yet confirmed Annual contribution limit £4,000 Not yet confirmed
*Indicative only: the actual bonus rate, contribution limit, and price cap haven’t been set. The Treasury has said these will be announced at a future Budget, after weighing options like a higher bonus with a lower savings limit, or vice versa.
Why the Bonus Timing Matters: A Worked Example
The single biggest practical difference between the two products is when the bonus is paid. Under the current LISA, the 25% bonus lands alongside each contribution and compounds with the rest of the account from day one. Under the proposed FTB ISA, only your own contributions grow; the bonus arrives as a lump sum only once you complete on a home.
To show what that’s worth in practice, here’s a comparison assuming someone contributes the maximum £4,000 a year to each product, with 6% annual growth, over 15 years:
In year 1, the difference is small, just £60. But the gap widens every year because it’s compound growth on the bonus itself that’s being lost, not just the bonus. By year 10, the LISA saver is roughly £3,972 better off than the equivalent FTB ISA saver. By year 15, that gap has grown to around £9,673.
This is a simplified, illustrative model. It assumes:
- The FTB ISA keeps the same 25% bonus rate and £4,000 annual limit as the current LISA (neither has been confirmed by the Treasury).
- Both accounts grow at a flat 6% a year, with no fees or tax drag.
- The FTB ISA bonus is treated as “crystallised” at each year shown, as if a home purchase completed at that point; in reality, you’d only receive it once, when you actually buy.
The takeaway isn’t that the FTB ISA is necessarily worse overall (removing the withdrawal penalty is a genuine improvement for anyone who ends up not buying a home), but that the current LISA’s monthly-compounding bonus has real, growing value the longer you save. That’s one reason experts have suggested opening a LISA now, while it’s still available, may be worth doing even with the change on the horizon.
A few other details worth flagging:
- Because the bonus is only paid at completion (not added monthly), your money won’t earn interest or growth on the government’s contribution along the way, a real trade-off against the current LISA.
- You’ll need a residential mortgage to claim the bonus; cash purchases and buy-to-let won’t qualify.
- Existing LISA funds can’t be transferred into a new FTB ISA, but you could hold both and put money from each toward the same property (you just can’t pay into both in the same tax year).
If You Already Have a Lifetime ISA
Nothing changes for you, and there’s no future contribution cut-off to plan around. Existing accounts continue under current rules (same 25% bonus, same withdrawal terms) for as long as you keep the account open, with no end date attached. This isn’t just a savings-platform reassurance; it comes directly from the government’s own consultation document, which states that current LISA holders will be allowed to keep contributing indefinitely even once the First Time Buyer ISA is up and running. You can also still open a brand-new LISA any time before the replacement launches, and it will work under exactly the same rules as accounts opened today.
Is a Lifetime ISA Still Worth Opening Now?
It may suit you if you:
- Are a first-time buyer aged 18–39.
- Can leave the money untouched for the long term.
- Want the certainty of a bonus that compounds while you save.
- Already have a separate emergency fund.
It may not suit you if you:
- Need easy access to your savings.
- Aren’t sure you’ll buy a home or reach age 60 before withdrawing.
- Can’t commit to leaving deposits untouched.
Given the LISA’s monthly-compounding bonus is arguably more generous than the proposed lump-sum version, opening one now, while it’s still available, could work out better than waiting for the FTB ISA, depending on your timeline.
Quick Checklist
- [ ] Am I aged 18–39, and eligible to open a LISA now?
- [ ] Am I saving for a first home under £450,000, or for retirement?
- [ ] Can I leave the money untouched until I qualify to withdraw?
- [ ] Do I have an emergency fund separate from this?
- [ ] Am I comfortable with the 25% penalty if I need to access it early?
- [ ] Will I stay within the £4,000 annual limit?
Final Thoughts
The Lifetime ISA still works exactly as it always has, and remains one of the most effective ways to boost a deposit or retirement pot. But its replacement is now official government policy, not speculation: the consultation is open, the direction of travel is clear, and April 2028 is the earliest the First Time Buyer ISA could arrive.
For now: existing LISA holders have nothing to worry about, and anyone still eligible to open one has a window to lock in the current, arguably more generous, bonus structure before it potentially disappears for new savers.
This article reflects HM Treasury’s First Time Buyer ISA consultation, published on GOV.UK on 23 June 2026 and open until 18 August 2026. Key figures (the bonus rate, contribution limit, and property price cap for the new First Time Buyer ISA) are still to be confirmed at a future fiscal event, so details may change before final legislation.