As part of ongoing reforms to ISAs, the Government is set to launch a new First Time Buyer ISA (FTB ISA) from April 2029.
This will be offered in place of the existing Lifetime ISA, with any LISAs opened until April 2029 being able to continue under their existing terms and conditions.
Key terms of the FTB ISA:
- Contributions are limited to £4,000 a year and this will contribute towards the £20,000 ISA allowance.
- The Government will provide a 25% bonus, up to a maximum of £20,000, calculated at the point the account is closed, and funds are withdrawn for the purchase of an eligible property.
- The 25% bonus is calculated based on the account balance, rather than the total amount paid into the account, so will take into account any interest earned on the account.
- This is a key difference to the LISA, where the 25% Government bonus is capped at £1,000 per year, so individuals saving the maximum £4,000 annually do not benefit from the bonus on any interest earned.
- The property price cap will remain at £450,000 and will also include those who decide to move their funds over from an existing Help to Buy ISA.
- Completion of the property purchase must happen within 90 days of claiming the bonus.
Any individuals who still have a Help to Buy ISA will be able to transfer their full account balance into the FTB ISA outside of the annual limit, as long as the transfer is made between 6 April 2029 and 1 December 2030 (the scheduled HTB ISA closure date).
Individuals will not be able to transfer an existing LISA into a FTB ISA, but both products can be used towards the same house purchase.
Transfers from any other ISAs (Cash, Stock & Shares or Innovative Finance) will be capped at the £4,000 limit.
Lifetime ISA changes:
In some areas of the UK, first time buyers may need to purchase a property which is above the £450,000 cap. In these instances, from 29 October 2026 the Government will allow LISA funds to be withdrawn for these purchases with a reduced withdrawal charge of 20% (compared to the current 25% charge).
If you have any questions about how the budget might affect you, do get in touch on 01242 776000 or tax@randall-payne.co.uk.