What we know about the ‘First time buyer ISA’
Writer, Hannah Williford
26 October 2026
4 minute read time
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- Treasury’s consultation proposes the First time buyer ISA but doesn’t yet give details on bonus levels, subscription limits, or property price caps
- The First time buyer ISA may replace the Lifetime ISA for first-time buyers, but removes its flexibility to use the account for retirement savings
- Bonuses would be paid only when a home is bought, which potentially makes the scheme simpler to manage but limits the potential for investment growth
- Lifetime ISA holders might not be able to transfer to the new ISA, but they can use both accounts towards the same home purchase
Everyone is talking about the new ‘First time buyer ISA' but we’re still guessing on some of the most important aspects. There’s still no detail on the level of government bonus, subscription limits or property price cap, making it difficult to judge whether this potential new product would be a meaningful improvement for aspiring homeowners.
HMRC has however confirmed that the First time buyer ISA is intended to replace the Lifetime ISA for first-time buyers only, meaning the product will likely not be able to be used for additional retirement savings.
AJ Bell’s Head of Public Policy Rachel Vahey says:
“By only focusing on helping those buying a house, the government is leaving fewer options for those who might use a Lifetime ISA to save for retirement. Self-employed individuals and others without access to a workplace pension can keep saving if they already have a Lifetime ISA.”
What is the First time buyer ISA?
The First time buyer ISA is intended to replace the Lifetime ISA, which was introduced in 2017 and has helped thousands of young people take their first step onto the property ladder. But the product has never been perfect, and the LISA withdrawal charge has caused real problems for savers who need to access their money for any reason other than buying a qualifying first home or reaching age 60.
The new bonus system would mean that the bonus will only be paid once the first home is purchased, rather than up front. This can come with some pros and cons for investors:
Pros:
It would remove the need for a claw back if the money is used for another purpose
The system should be simpler to manage without the withdrawal charge
Cons:
Investors wouldn't benefit from the investment growth on those bonus savings
Missing out on the bonus investment growth could mean less cash when it comes time to buy
Example
Someone paying in £4,000 each year for five years into a Lifetime ISA with a bonus added each year would have built up £28,165 assuming 4% growth net of charges.
Under the First time buyer ISA, assuming the same terms including payments, and that a government bonus of 25% is added when buying the house, the ISA holder would only have built up £27,532.
Read more about how the Lifetime ISA bonus works currently.
First time buyer ISA rules
The Treasury will not allow current Lifetime ISA holders to transfer to the new First time buyer ISA. But both products would be allowed to be used towards the same purchase. This leaves Lifetime ISA holders potentially juggling two products ahead of their life-changing purchase.
The Treasury has not said what this means for self-employed people saving for later life. Those who already have a Lifetime ISA would be able to keep saving, but that does nothing for the thousands of self-employed workers and others without access to a workplace pension who may need a flexible retirement savings option in future.
How will the new First time buyer ISA work?
The proposed new First time buyer ISA will be designed to help people save towards buying their first home. It could only be used where the home is bought with a mortgage.
Savers could receive a government bonus when they use the money to buy their first home. The bonus could be based on how much they have paid in, less any withdrawals, not on any investment growth. There will be no upper age limit, so people will never be too old to open or keep one.
But the government has not yet confirmed some key details, including how much people will be able to pay in each year, the maximum property price that will qualify, or how generous the bonus will be.
We do know that the new ISA would sit within the wider ISA rules. For example, money paid into the cash version of the First time buyer ISA would count towards the overall ISA allowance.
People would also not be able to transfer money between a Lifetime ISA and First time buyer ISA. However, they would be able to use money from both accounts towards the same first home purchase.
Get your money working for you
More about Lifetime ISAs
Everything you need to know about Lifetime ISAs, from how the government bonus works, to how you can avoid any withdrawal penalties.
Open a Lifetime ISA
Whether you’re buying your first home or saving for retirement, get a 25% bonus up to £1,000 each tax year when you add money to a Lifetime ISA.
Transfer an account
Thinking of moving a Lifetime ISA over to us? It’s easy. We'll just need a few details of your current provider, then we’ll do the rest.
Important information: These articles are for information purposes only and are not a personal recommendation or advice. Tax rules can change in the future and the tax treatment depends on your personal circumstances. ISA rules apply.