Introduction
The First Time Buyer ISA is the account the government wants to put in place of the Lifetime ISA. HM Treasury set out its design in a consultation that ran from 22 June to 18 August 2026, and the Budget delivered on 28 October 2026 confirmed that it will replace the Lifetime ISA.
The idea is simple: save towards a first home inside an ISA, receive a government bonus when you buy, and take your money out without a penalty if your plans change. What is not settled yet are the numbers that decide how generous it will be: the yearly limit, the bonus rate and the property price cap.
This guide explains how the new account would work, how it compares with the Lifetime ISA and the old Help to Buy ISA, what the Budget changed, and what existing savers should keep in mind while the detail is finalised.
The information provided on this page and throughout the website is for general information purposes only and does not constitute financial advice. It is important that you conduct your own research and consider your own personal circumstances before making any investment decisions.
Tax rules for ISAs can change and the value of any tax treatment depends on your individual circumstances. The value of investments can fall as well as rise and your capital is at risk. Figures quoted here reflect published government guidance at the date shown, and draft legislation may still change.
Quick Answer: What Is The First Time Buyer ISA?
The First Time Buyer ISA is a proposed ISA for buying a first UK home with a mortgage. It pays a government bonus on what you pay in, but only when you buy, so there is no withdrawal charge. It will replace the Lifetime ISA. The yearly limit, bonus rate, price cap and launch date are not set yet.
What The Budget On 28 October 2026 Confirmed
Chancellor John Healey’s first Budget touched the ISA system in several places. As reported by Mortgage Professional and Portfolio Adviser, the speech:
- confirmed that the First Time Buyer ISA will replace the Lifetime ISA;
- promised a change to the Lifetime ISA withdrawal charge, so that savers whose chosen home costs more than the price limit get back “at least what you put in”;
- dropped the planned cut to a £12,000 yearly cash ISA limit for under 65s, which was due from 6 April 2027, so the cash ISA limit stays at £20,000 for all ages;
- announced work with the industry on a new Starter ISA for first-time investors; and
- confirmed a Your First Home equity loan scheme from next spring.
The speech, as reported, did not give the First Time Buyer ISA’s yearly limit, bonus rate, price cap or launch date. When this guide was written, the full Budget documents could not yet be checked on GOV.UK, and the consultation page still said the government was analysing the feedback. We will update this guide once the detail is published.
How The First Time Buyer ISA Would Work
The consultation describes a product built for one purpose: buying a first home. These are the main design points HM Treasury proposed.
- Who can open one: UK residents aged 18 or over who are buying their first home. There is no upper age limit, because people are buying their first home later in life.
- Cash or investments: the government wants both a cash version and a stocks and shares version, with providers setting their own interest rates and investment choices.
- Tax: interest and investment growth would be tax-free, as in any ISA, and the money you pay in would count towards your ISA allowance, which is £20,000 for the 2026/27 tax year.
- The bonus: paid only when you withdraw money to buy your first home, and worked out on your net subscriptions, meaning what you paid in minus anything you took out before claiming. Growth and interest do not earn a bonus.
- Withdrawals: no withdrawal charge. If you take money out for anything else, you simply lose the bonus on that money.
- The purchase: a UK home within the price cap, bought with a legal mortgage, to live in as your main residence. Cash purchases do not qualify.
The diagram below shows the route from opening the account to receiving the bonus, using the timings in the consultation.
One practical difference stands out. With a Lifetime ISA, the 25% bonus is added to your account each month and then earns interest or investment growth alongside your own money. With the First Time Buyer ISA, the bonus stays outside the account until you buy, so it never grows.
A Worked Example Of The Bonus On Net Subscriptions
Because the bonus rate has not been set, the example below uses 25%, the Lifetime ISA rate, purely to show the mechanics. It also assumes a £4,000 yearly limit, which is not confirmed either.
- You pay in £4,000 a year for three years, £12,000 in total.
- In the second year you take out £1,000 for an emergency. There is no charge.
- Your net subscriptions are now £11,000.
- By the time you buy, the account has grown to £12,400. The bonus is still worked out on £11,000, so at 25% it would be £2,750.
The same emergency withdrawal from a Lifetime ISA would have cost part of your own savings, as the section on Lifetime ISA holders below shows.
First Time Buyer ISA Vs Lifetime ISA Vs Help To Buy ISA
The table compares the three home-buying ISAs on the points that matter most. Figures for the new account are proposals from the consultation and may change.
| Feature | First Time Buyer ISA (proposed) | Lifetime ISA | Help to Buy ISA |
|---|---|---|---|
| Who can open one | Aged 18 or over, no upper age limit | First payment before age 40; pay in until 50 | Closed to new savers |
| Yearly limit | Not yet set; counts towards the £20,000 ISA allowance | £4,000 | £1,200 to open, then £200 a month |
| Government bonus | Rate not yet set; based on net subscriptions | 25%, up to £1,000 a year | 25%, up to £3,000 |
| When the bonus is paid | When you withdraw to buy | Monthly, into the account | On completion |
| Property price cap | Not yet set; to match the Lifetime ISA and Help to Buy ISA caps | £450,000 | £450,000 in London, £250,000 elsewhere |
| Withdrawing for other reasons | No charge; you lose the bonus | 25% charge, unless aged 60 or over or terminally ill | No charge; you lose the bonus |
| Held before the bonus | 12 months | 12 months | 3 months |
| Cash or investments | Both | Both | Cash only |
| Use for retirement | No | Yes, from age 60 | No |
Sources: HM Treasury, First Time Buyer ISA: Consultation (updated 29 June 2026), design features summary; GOV.UK, Lifetime ISA guide. Checked 28 October 2026.
What Changes For Lifetime ISA Holders
If you already have a Lifetime ISA, nothing closes and nothing moves automatically. The consultation sets out these rules:
- You can keep paying into your Lifetime ISA under the current rules, with no end date set.
- You can still open a Lifetime ISA until the new account is available, if you are eligible.
- You cannot transfer a Lifetime ISA into a First Time Buyer ISA, because that money has already received a bonus.
- You can hold both, but you can only pay into one of them in the same tax year.
- You can use money from both towards the same purchase, and the price caps will be aligned so that no account holder loses out.
If you are weighing up a Lifetime ISA now, check the provider’s charges as well as the bonus. Hargreaves Lansdown, for example, offers a stocks and shares Lifetime ISA, and our Hargreaves Lansdown review covers its fees.
The government’s main reason for replacing the Lifetime ISA is its withdrawal charge. The consultation says more Lifetime ISA holders have lost part of their original savings than have used the account to buy a house, and that unauthorised withdrawal charges reached 8% of all accounts opened in 2024/25. By 2024/25, 314,600 savers had used it to buy a first home.
£800 in, £750 back
Using GOV.UK's own example, £800 of savings plus the 25% bonus makes £1,000. Withdraw it all for a non-qualifying reason and the 25% charge takes £250, leaving you £50 short of what you paid in.
Under the current rules, you can only avoid that charge when buying your first home, at 60 or over, or if you are terminally ill with less than 12 months to live. The Chancellor said the Budget will address the charge for savers whose home costs more than the £450,000 limit. Until the detail is published and takes effect, the 25% charge remains in place.
If you hold a Help to Buy ISA, the consultation proposes that you will be able to transfer it into a First Time Buyer ISA, up to the yearly limit, in the same way you can move it into a Lifetime ISA today. Payments into Help to Buy ISAs stop in November 2029, and our ISA transfer guide explains how moving an ISA between providers works.
Cash Or Stocks And Shares: Which First Time Buyer ISA Fits?
The choice between the cash and stocks and shares versions mostly comes down to how soon you expect to buy.
Money you need for a deposit in the next few years is exposed to market falls if it is invested, and a fall shortly before you exchange can shrink your deposit at the worst moment. Cash is steadier, but it can lose value in real terms when inflation runs above the interest rate. A longer horizon gives investments more time to recover from falls, although there are no guarantees.
There is also a design point to watch. The consultation proposed that money could not be transferred from a stocks and shares First Time Buyer ISA into a cash First Time Buyer ISA, and HM Treasury acknowledged this would stop savers close to a purchase from reducing their risk that way. The rule was written to protect the planned £12,000 cash ISA limit, which the Chancellor has now dropped, so it is one of the details to check when the final rules appear.
If you are not a first-time buyer, or you are investing for a goal further away than a house deposit, a standard stocks and shares ISA gives you the full £20,000 allowance with no property rules attached. Our guide to the best stocks and shares ISAs compares 13 UK providers on fees, features and who each one suits.
Investing for the long term rather than a deposit? See how UK stocks and shares ISA providers compare.
Capital at risk.
Who Loses Out: Retirement Savers And The Self Employed
The First Time Buyer ISA is for buying a home only. The Lifetime ISA’s second purpose, penalty-free withdrawals from age 60, does not carry across. The consultation argues that the Lifetime ISA may be steering some people away from pensions that could suit them better.
That matters most for the self-employed, who do not receive automatic workplace pension contributions and have used the Lifetime ISA as a flexible retirement pot. Existing holders keep their accounts, but new savers in that position would need to look elsewhere, such as a pension. Our guide to the best SIPP providers covers the self-invested route.
What Is Still Undecided
- The yearly limit, bonus rate and price cap. The consultation said these would be set at a fiscal event. It asked whether a lower limit or cap could pay for a higher bonus, which would shift help towards savers outside London and the South East.
- A lifetime cap on the bonus. The consultation asked whether there should be one alongside the yearly limit.
- The launch date. The consultation gives no date. Some providers have suggested around April 2028, but the government has not confirmed one.
- How the cash rules apply. The consultation tied the cash version to the £12,000 cash ISA limit and its anti-avoidance rules. With that limit dropped, the final design needs to say what replaces them.
- The consultation response. GOV.UK says the government is analysing the feedback, with the outcome to follow.
If you want to see what a standard ISA could grow to in the meantime, our Stocks and Shares ISA calculator shows the effect of monthly top-ups, fees and the tax an ISA saves.
Frequently Asked Questions
Key Takeaways
It replaces the Lifetime ISA
The Budget on 28 October 2026 confirmed the switch. Existing Lifetime ISAs stay open and can still be paid into.
No withdrawal charge
The bonus is paid only when you buy, based on what you paid in, so taking money out early costs you the bonus rather than your own savings.
The numbers are not set yet
The yearly limit, bonus rate, property price cap and launch date are still to be announced.
No transfers from a Lifetime ISA
You can hold both accounts and use both for the same purchase, but you can only pay into one each tax year.
A home only, not retirement
The Lifetime ISA route to penalty-free withdrawals at 60 does not carry across to the new account.
Not sure which platform suits the way you invest? Answer a few quick questions and see which ones fit.
Capital at risk.
Sources, all checked 28 October 2026: HM Treasury, First Time Buyer ISA: Consultation (updated 29 June 2026); HM Treasury, First Time Buyer ISA consultation page; GOV.UK, Lifetime ISA and Withdrawing money from your Lifetime ISA; Hargreaves Lansdown, What is a Lifetime ISA?; Budget speech coverage from Mortgage Professional, Portfolio Adviser and Money Marketing (28 October 2026).
The information provided on this page and throughout the website is for general information purposes only and does not constitute financial advice. It is important that you conduct your own research and consider your own personal circumstances before making any investment decisions.
Tax rules for ISAs can change and the value of any tax treatment depends on your individual circumstances. The value of investments can fall as well as rise and your capital is at risk. Figures quoted here reflect published government guidance at the date shown, and draft legislation may still change.
