In the Autumn Budget on 28 October 2026 the Chancellor confirmed a new First Time Buyer ISA to replace the Lifetime ISA from April 2029. It keeps the £4,000 a year limit, the 25% bonus and the £450,000 price cap, but removes the upper age limit, pays the bonus on the final balance and drops the withdrawal charge. Lifetime ISA savers who buy above the cap now lose less from 29 October 2026.
£4,000
a year you can pay in
25%
bonus on the final balance
£20,000
most bonus you can get
£450,000
price cap, unchanged
What was announced
HM Treasury published its response to the First Time Buyer ISA consultation alongside the Budget. The new account opens on 6 April 2029 and is offered instead of the Lifetime ISA. Savers can pay in up to £4,000 a tax year, and the government adds 25% of the final balance when the money is used for a first home, up to a total bonus of £20,000.
The account is only for buying a home. There is no retirement option and no withdrawal charge: take the money out for anything else and you simply do not get a bonus. You must be 18 or over to open one, with no upper age limit, you must buy with a mortgage, and the account must have been open for a year before you can claim.
“I’m announcing that a first-time buyer ISA will replace the lifetime ISA.”
Why the Lifetime ISA is being replaced
The Lifetime ISA was designed for two jobs at once, a first home and retirement, and that has caught people out. Its 25% charge for taking money out for any other reason takes back the bonus and a slice of the saver’s own money. In the consultation, the Treasury said the number of withdrawal charges is rising every year, reaching 8% of all accounts opened in 2024-25.
“More LISA holders have lost a part of their original savings than have used it to purchase a house.”
314,600
savers had used a Lifetime ISA to buy a first home by 2024-25
8%
of Lifetime ISAs opened in 2024-25 paid a withdrawal charge
194
responses to the consultation, from 36 firms and 158 people
Lifetime ISA and First Time Buyer ISA side by side
| Feature | Lifetime ISA | First Time Buyer ISA |
|---|---|---|
| Who can open one | Aged 18 to 39. You can pay in until you are 50. | Aged 18 or over, with no upper age limit. |
| Yearly limit | £4,000, part of your £20,000 ISA allowance | £4,000, part of your £20,000 ISA allowance |
| Government bonus | 25% of what you pay in, added as you save. Up to £1,000 a year. | 25% of the final balance, including interest or growth, paid when you buy |
| Most bonus you can get | No overall limit, but £1,000 a year until you are 50 | £20,000 |
| Price cap | £450,000 | £450,000 |
| Buying above the cap | 20% charge from 29 October 2026 (was 25%), so you get back what you paid in | No charge. You keep your savings and growth but get no bonus. |
| Taking money out for anything else | 25% charge, unless you are 60 or over or terminally ill | No charge, and no bonus |
| Use in retirement | Yes, from age 60 | No, it is only for a first home |
| Must the account be open before you buy? | 12 months | 12 months |
| Must you buy with a mortgage? | Yes | Yes |
| Open to new savers | Until April 2029 | From 6 April 2029 |
How much the bonus could be worth
The bonus is worked out on the balance when you buy, not on what you paid in, so interest and investment growth earn a bonus too. Saving the full £4,000 a year with no growth, it takes 20 years to reach the £20,000 limit. At 4% growth a year it takes 15.
Saving £4,000 at the start of each tax year
| Years | Paid in | Total with bonus, 0% growth | Total with bonus, 4% growth |
|---|---|---|---|
| 1 | £4,000 | £5,000bonus £1,000 | £5,200bonus £1,040 |
| 3 | £12,000 | £15,000bonus £3,000 | £16,232bonus £3,246 |
| 5 | £20,000 | £25,000bonus £5,000 | £28,165bonus £5,633 |
| 10 | £40,000 | £50,000bonus £10,000 | £62,431bonus £12,486 |
The £450,000 cap is not moving
Most people who answered the consultation wanted the cap changed. Around 90% of the firms that addressed it backed some rebalancing, and 65% to 70% of individuals asked for the cap to be raised, indexed, set by region or removed. The government kept it at £450,000, the level set when the Lifetime ISA launched in 2017, and the same cap now applies to the new account.
That matters most in the south. Over the 12 months to June 2026, the average new build sold for more than £450,000 in London and the South East, and in 82 of 349 council areas across the UK.
Average new build price by region against the £450,000 cap
£450,000 cap
On Earlybird, 175 of the 275 new homes listed with a price (64%) are on sale for £450,000 or less, so most would qualify. Most of the rest are in the East Midlands (31), Greater Manchester (22), Yorkshire and The Humber (18).
Buying above the cap with a Lifetime ISA now costs less
The change that takes effect straight away is for Lifetime ISA savers. From 29 October 2026, if you use the account for a first home that costs more than £450,000, the charge is 20% of the balance rather than 25%. A 20% charge takes back exactly the government bonus, so you keep everything you paid in.
Paid in £10,000, plus a £2,500 bonus, buying a home above £450,000
- Your money back
- Your money lost
- Bonus taken back
“This will recover the government bonus while allowing savers to retain their own contributions.”
What the industry said
Reaction was broadly welcoming, with the cap the main complaint. Paula Higgins, chief executive of the HomeOwners Alliance, welcomed the smaller charge but called the unchanged cap a disappointment, and suggested caps of £500,000 in outer London and £650,000 in inner London, rising with inflation each year.
Brian Byrnes, director of personal finance at Moneybox, questioned whether a new account was needed at all rather than fixing the Lifetime ISA, a view some providers also gave in the consultation.
“First-time buyers need simplicity, certainty and support, not further complexity.”
Mark Blackwell, chief operating officer of Cotality, said the new ISA and the Your First Home scheme should help buyers without family money, but that lenders and buyers need to understand how the scheme works before it starts next spring. Olly Cheng of Rathbones welcomed the help, while warning that buying a first home should not depend on family wealth.
What it means if you are buying a new build
- Check the timing of exchange and completion. The bonus is paid at exchange and you then have 90 days to complete. Homes bought off-plan often exchange months before they are finished, so ask the developer for a realistic completion date before you rely on the bonus.
- Stay under £450,000 at the final price. Extras you pay for can push the price over the cap. Developer incentives such as stamp duty paid do not lower the price itself, so check the figure in the contract.
- Look at Your First Home. The government-backed equity loan confirmed in the Budget is only for first-time buyers of new build homes. You need a deposit of at least 2.5%, the government lends 20% of the price, interest-free for five years, and household income must be under £110,000 (£140,000 in London). Applications are due to open in February 2027. Our first-time buyer schemes guide explains how it works.
- If you are 18 to 39 and buying before 2029, the Lifetime ISA is still open. Accounts opened before April 2029 carry on under today’s rules, and need to be open for 12 months before you can use them to buy.
- If you are 40 or over, this is new. You could not open a Lifetime ISA, but you will be able to open a First Time Buyer ISA from April 2029.
Key dates
28 October 2026
First Time Buyer ISA and Your First Home details confirmed in the Autumn Budget.
29 October 2026
Lifetime ISA charge for buying above £450,000 falls from 25% to 20%.
End of December 2026
Pre-registration for the Your First Home scheme is due to open.
February 2027
Full applications for Your First Home are due to open, with the first loans expected from April 2027.
6 April 2029
First Time Buyer ISA launches. Providers stop opening new Lifetime ISAs.
6 April 2029 to 1 December 2030
Help to Buy ISA savers can move their whole balance into a First Time Buyer ISA, on top of the £4,000 limit.
Questions to ask the developer
- Will this home be under £450,000 at the final agreed price, including any extras I am paying for?
- When do you expect exchange and completion, and can completion happen within 90 days of my bonus claim?
- Can my solicitor deal with an ISA bonus claim, and how long does it usually take?
- Does this development take part in the Your First Home scheme?
Sources
- HM Treasury: First Time Buyer ISA consultation, government response (October 2026)
- HMRC: Budget 2026, overview of tax legislation and rates
- The Intermediary: FTB ISA to replace Lifetime ISA
- Which?: Autumn Budget 2026, boost for first-time buyers
- Earlybird: New build premium by council (UK House Price Index)
Government text is quoted under the Open Government Licence v3.0. Published 28 October 2026. General information only, not financial advice. The rules for the new account still need legislation, so check the latest guidance before you decide how to save.