Lifetime ISA first-time buyer rules and Your First Home

Can you use a Lifetime ISA with Your First Home?

Yes, as far as the rules published so far allow. A Lifetime ISA first-time buyer bonus adds 25% to what you save, up to £1,000 a year, and the money can go towards a first home costing £450,000 or less (GOV.UK). It is a savings account, not a purchase scheme, so it does not compete with Your First Home; it helps you reach the 2.5% deposit that Your First Home asks for (GOV.UK).

Two things are still unknown. Your First Home’s local price caps are set at the Budget on 28 October 2026 (HM Treasury); if any of them sit above £450,000, some buyers will qualify for the scheme but not for a penalty-free Lifetime ISA withdrawal. And the scheme’s own rules on where your deposit can come from are not published. Nothing announced so far suggests a problem.

Is the Lifetime ISA being replaced?

Yes, for new savers, and the timing matters if you are deciding whether to open one. On 23 June 2026 HM Treasury published a consultation on a “new, simpler ISA product to support first time buyers to buy a home”, the First-Time Buyer ISA, and said that “once available this new product will be offered in place of the Lifetime ISA” (GOV.UK). The consultation closed on 18 August 2026 and the government is “analysing your feedback”. Nothing is settled yet: the bonus rate, the annual limit, the property price cap and the launch date all wait for the response, which could come at the Budget on 28 October 2026 or later.

What is known so far, from the consultation and the coverage of it:

• The new account is for first-time buyers only, so it drops the Lifetime ISA’s retirement use and its under-40 rule, and the proposal is to pay the bonus at exchange of contracts rather than charge a penalty for early withdrawal (MoneySavingExpert).
• Existing Lifetime ISAs carry on under today’s rules; you can keep paying in and still use the account for a first home or at 60. Lifetime ISA money cannot be moved into the new account, because it already carries a bonus.
• Until the new account exists, the Lifetime ISA is the only first-time buyer savings bonus on offer, and its rules below still apply in full.

We will update this page the day the government publishes its response. Until then, treat “open a Lifetime ISA” decisions as a question of timing: the sooner you might buy, the more the 12-month rule and the bonus in hand matter; the further away, the more likely the new account arrives first.

What are the Lifetime ISA first-time buyer rules?

A Lifetime ISA is a government savings account that pays a 25% bonus on up to £4,000 a year, for use on a first home or after age 60. The rules are short, and every one of them matters on the day you buy.

Because the money goes straight to your conveyancer for the purchase, plan to cover early costs such as a new-build reservation fee from other savings. The first-time buyer costs guide lists what falls due when.

How much faster does the bonus get you to a 2.5% deposit?

Saving £300 a month, you reach a £5,750 deposit in about 20 months in an ordinary account and about 16 months in a Lifetime ISA, because every £300 you pay in becomes £375. The £5,750 is 2.5% of the £230,000 example home used in reports of the announcement, the deposit Your First Home is expected to need (GOV.UK). The table ignores interest, which would shorten both routes slightly.

Three points from the table. The Lifetime ISA saves you about four months on the 2.5% deposit and about eight months on the 5% one; the bigger the target, the more the bonus is worth. The 12-month minimum never gets in the way here, because every route takes longer than a year. And £300 a month is under the £4,000 annual limit (£3,600 a year), so the whole amount earns the bonus; you cannot pay in more than £4,000 a year, so anything above about £333 a month has to go elsewhere (GOV.UK). Work out your own timeline in the deposit calculator.

What does the 25% withdrawal charge really cost?

The 25% charge takes back the bonus and 6.25% of your own money on top. GOV.UK’s example: you save £800, the bonus adds £200, and the account holds £1,000. Withdraw it for a non-qualifying reason and the charge is £250, leaving £750, so you are £50 worse off than if you had never opened the account (GOV.UK).

For a Your First Home buyer, the charge bites in four situations: the home costs more than £450,000; you complete less than 12 months after your first payment; you turn out not to count as a first-time buyer under the Lifetime ISA rules; or you buy without a mortgage. The first is the one to watch. If the Budget sets a Your First Home price cap in your area above £450,000 and you want a home priced between the two figures, your choices are to leave the Lifetime ISA money for retirement, to accept the charge, or to look at a cheaper home.

Lifetime ISA vs Your First Home: what each one does

The Lifetime ISA helps you save the deposit; Your First Home helps you buy with a smaller one. They solve different problems, which is why the sensible question is how to use both, not which to pick.

The Help to Buy interest figure is the precedent we assume for Your First Home until the real rules are published (GOV.UK). The interest page explains the assumption.

Can you use a Lifetime ISA with Shared Ownership or First Homes?

Yes, under the same conditions, with one twist for Shared Ownership. HMRC applies the £450,000 test to the full value of the home, not the share you buy: the price you pay is divided by your share to get the figure that is tested (HMRC guidance). A 40% share of a £300,000 home passes, because £300,000 is under the limit; a 40% share of a £500,000 home does not, even though you pay only £200,000 for it.

First Homes buyers are first-time buyers by definition and the discounted price is capped at £250,000 outside London and £420,000 in Greater London (GOV.UK guidance), so the £450,000 limit is never a problem. The comparison pages for Shared Ownership and First Homes cover the schemes themselves.

Should you open a Lifetime ISA now?

If you are under 40, more than 12 months from buying, and confident your first home will cost £450,000 or less, a Lifetime ISA still gives you a 25% bonus the day it lands, and nothing announced takes that away from accounts already open. Think harder if any of these apply, and read the section above on the First-Time Buyer ISA first: if its terms turn out better and you are years from buying, waiting may cost you nothing, while if you could buy within two years the Lifetime ISA’s bonus is the one you can count on.

• You might buy within 12 months. Money you pay in now cannot be used penalty-free until a year has passed. A small opening payment starts the clock; keep the rest of your deposit elsewhere.
• Your target home could cost more than £450,000, or Your First Home’s price cap in your area might let you buy above it. Do not put money in that you cannot afford to leave until 60.
• You are close to 40. You must make the first payment before your 40th birthday; after that the account is closed to you for good.
• You are choosing between a cash and a stocks and shares Lifetime ISA for a purchase within five years. A fall in the market just before you buy would shrink the deposit; that is a judgement for you, not us.

What to do next

• Work out your deposit target with the deposit calculator, using both 2.5% and 5% in case Your First Home does not suit the home you end up wanting.
• If you are under 40 and at least a year from buying, compare Lifetime ISA providers on interest rate and fees; we do not recommend one.
• Read how much deposit Your First Home needs and the first-time buyer costs guide for the costs the Lifetime ISA cannot cover.
• Check back on 28 October 2026. If the Budget sets any Your First Home price cap above £450,000, this page will say which areas are affected.