- HMRC has confirmed that the new ISA product to replace the Lifetime ISA is intended to help first-time buyers only (Tax-free savings newsletter 20 — January 2026 - GOV.UK)
- The bonus will be given when a person buys a house rather than on each payment made
- Lifetime ISAs can only be opened by those between the ages of 18 and 39
- In the Autumn Budget, the government announced they intended to consult on a new ISA product early this year
Rachel Vahey, head of public policy at AJ Bell, comments:
“Since its launch in 2017, the Lifetime ISA has helped thousands of young people get a step on the property ladder. But it’s not without its flaws so it’s no surprise the government is going to replace it with a different model.
“Paying an upfront bonus means having to claw it back if it’s not used in the intended way, and it’s this withdrawal charge that has caused a lot of the problems. It’s far easier to get rid of an upfront incentive and go back to giving a bonus only when a house is bought.
“The return to the help-to-buy model – the predecessor of the Lifetime ISA – should also be cheaper for the government. However, potential homeowners lose out on the investment growth earned on the bonus during the years they save for their first house. That might mean having less money to buy the home of their dreams.
“The government will soon consult on what the new house-buying ISA will look like. It needs to design the transition to the new product with the best interests of those who currently are investing in a Lifetime ISA in mind. It should be made easy for these people to continue to buy a house with their Lifetime ISA if they want, or to transfer their investment to the new ISA product without incurring an additional 6.25% charge on their savings.
“But 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. But that doesn’t help the thousands of people who need a solution in the future.
“Instead, we are relying on the Pension Commission – who publish their interim report later this year – to come up with a cunning plan to help these groups save for retirement.”
