Short answer: probably not.

The government has confirmed it plans to replace the Lifetime ISA with a shiny new savings account built specifically for first-time buyers. More details have now emerged, and the general view from the savings industry is: don’t put your deposit plans on hold waiting for it.

Here’s what’s happening, in plain English.

What the Lifetime ISA does now

The Lifetime ISA (or LISA) has been around since 2017. If you’re 18 or over and under 40, you can open one and pay in up to £4,000 a year until you turn 50. The government tops that up with a 25% bonus – up to £1,000 of free money every year – paid monthly. You can hold it in cash or invest it.

You can then use it towards your first home, or leave it until you’re 60 and take it as retirement money.

Free cash for saving. What’s not to like?

Why it’s being replaced

A couple of things, mainly.

The property price cap is stuck at £450,000 and hasn’t moved since 2017 – while house prices very much have. If you buy something above that cap and pull your money out, you’re hit with a 25% withdrawal charge. That’s designed to claw back the government bonus, but the maths means it also takes a slice of your own savings with it.

Plenty of people in the industry have pointed out this could be fixed by simply raising the cap and softening the penalty. The government has instead decided to close the LISA to new savers and build something new, saying the current account isn’t working well for a lot of people.

The replacement isn’t expected to go on sale until 2028 at the earliest.

What we know about the new First-Time Buyer ISA

On the face of it, it looks friendlier:

  • No upper age limit for opening one
  • No withdrawal charges

So far, so good. But there’s a catch, and it’s a meaningful one.

The government bonus won’t drip in monthly. It’ll be paid as a single lump sum when you actually buy your first home. And it’ll be calculated on what you’ve paid in, not what your pot has grown to – so any interest or investment growth is ignored when the bonus is worked out.

That means you lose years of growth on the bonus money itself. Moneybox ran the numbers on someone saving £333 a month for ten years with a 6% return: getting the bonus at the end rather than monthly leaves them over £3,600 worse off, assuming the new bonus is still 25%.

And that’s a big assumption. We don’t yet know:

  • Whether the bonus will still be 25%
  • Whether the annual limit will still be £4,000
  • Whether the £450,000 property cap will rise on either account

Can you have both?

Yes – with rules.

  • You can’t transfer a Lifetime ISA into the new account. That’s deliberate, to stop anyone collecting two lots of government bonus.
  • You can hold both accounts, but you can only pay into one of them in any given tax year.
  • If you hold both, you can put the money from both towards the same property purchase.
  • You’ll be able to move a normal cash ISA into a cash first-time buyer ISA, and a stocks and shares ISA into the equivalent version – but not from stocks and shares into cash.

One thing worth noting: if you park your money in a normal ISA now rather than opening a Lifetime ISA, you’re giving up the 25% bonus in the meantime.

What this means if you’re saving for a first home

Saving a deposit takes time. If you’re eligible for a Lifetime ISA today and buying somewhere under £450,000 looks realistic, there’s very little reason to sit on your hands until 2028. You can keep collecting the bonus and the growth on it while the details of the new account get ironed out.

If you’re already 40 or over, or you’re likely to be buying above the price cap, the new account may well suit you better when it lands – that’s worth keeping an eye on.

Where we come in

We don’t advise on ISAs or savings accounts – that’s not our patch. What we do is work out what you can actually borrow, what your deposit needs to look like, and which lenders will play ball when you’re ready to buy.

If you’re saving towards a first home and want a realistic picture of the numbers before you get too far down the road, get in touch. It’s a free chat, and knowing your target makes saving for it a lot less vague.

Source: The Guardian, 31 August 2026 – “First-time buyer Isa v lifetime Isa – which one should you choose?”

This article is for general information only and does not constitute advice on savings or investment products. Tax treatment and government schemes depend on individual circumstances and may change. Your home may be repossessed if you do not keep up repayments on your mortgage.

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