Government to Replace Lifetime ISA with First-Time Buyer ISA, Existing Accounts Unchanged

The UK government announced that the Lifetime ISA will be discontinued and succeeded by a First Time Buyer ISA, expected to appear around April 2028, though the proposal is still subject to consultation and may change. Holders of existing Lifetime ISAs are assured that their accounts will continue unchanged, allowing ongoing contributions and the 25% government bonus of up to £1,000 per year. The new ISA is aimed solely at first-home buyers, dropping the retirement component and the requirement that savers be under 40, while also removing the punitive 25% withdrawal charge for non-qualifying withdrawals.

A key difference is that the bonus will be credited only at the point of a qualifying home purchase, after the account has been open for at least a year, which reduces the potential growth of the bonus compared with one outlet scheme. Transfers from a Lifetime ISA to the new product are prohibited because the bonus cannot be claimed twice, but money from both accounts may be combined to fund the same purchase. Potential savers are advised not to withdraw funds prematurely, as the 25% penalty still applies for non-eligible uses.