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Lifetime ISA and the new First-Time Buyer ISA: saving for a house deposit in 2026
For most first-time buyers under 40, the Lifetime ISA (LISA) is still the best ISA for a house deposit: save up to £4,000 a year and the government adds 25%, up to £1,000. A new First Time Buyer ISA is planned to replace it, but it isn't available yet and existing LISAs will carry on. Here's how the LISA works, the traps, and what could change.
Rules checked against GOV.UK and HMRC guidance on 17 September 2026. The First Time Buyer ISA is still a proposal.
Government bonus
25%
Up to £1,000 a year on £4,000 of savings, until you turn 50.
Property price cap
£450,000
The home must cost £450,000 or less, and you must buy with a mortgage.
Waiting time
12 months
Your purchase must be at least 12 months after your first payment.
Withdrawal charge
25%
On other withdrawals before 60. You lose more than the bonus.
LISA vs ISA: which is best for first-time buyers?
If you're 18 to 39 and buying a home under £450,000 with a mortgage, the LISA's bonus is hard to beat. A cash ISA is more flexible, so many buyers use both: the LISA for the deposit, a cash ISA for moving costs and emergencies.
| Lifetime ISA | Cash ISA | Help to Buy ISA | |
|---|---|---|---|
| Can you open one now? | Yes, aged 18 to 39 | Yes, aged 18 or over | No, closed to new savers |
| How much you can pay in | £4,000 a year, until 50 | Up to £20,000 a year (all ISAs combined) | £200 a month, until November 2029 |
| Government bonus | 25%, up to £1,000 a year | None | 25%, up to £3,000 in total |
| Property price cap | £450,000 | None | £250,000, or £450,000 in London |
| Taking money out | 25% charge unless buying a first home, aged 60+ or terminally ill | Any time, subject to the account terms | Any time, but you lose the bonus |
| Cash or investments? | Either, or both | Cash | Cash |
We are not tax advisers and this is not tax advice. How ISAs, the government bonus and the withdrawal charge are treated is a general summary based on the rules published at the time of writing, and we make no warranty about the tax you will pay. Speak to a qualified tax adviser or accountant about your own circumstances.
How a Lifetime ISA account works
- Open it before you turn 40You must be 18 to 39 and UK resident, or a Crown servant or armed forces member serving overseas.
- Pay in up to £4,000 a yearMonthly or in lump sums, until you turn 50. It counts towards your £20,000 ISA allowance.
- Collect the 25% bonusIt's added as you pay in, usually monthly, and then earns interest or growth too.
- Wait at least 12 monthsCount from your first payment into the LISA.
- Buy through a conveyancer, with a mortgageYour provider pays the money straight to your solicitor or conveyancer.
Cash or stocks and shares LISA?
Cash LISA
Suits buying within a few years
Your savings can't fall in value. The better choice for most people buying soon.
Stocks and shares LISA
Suits a longer time frame
Could grow more over time, but can fall just when you need the money, and may carry fees.
How much could a LISA add to your house deposit?
If you pay in the full £4,000 a year for three years, you'll have put in £12,000 and received £3,000 in bonus. Buying with someone who does the same doubles it.
Saving £4,000 a year in a Lifetime ISA
Your money plus the 25% bonus, before any interest or growth
You don't need to save the maximum: £100 a month earns a £300 bonus a year. See our guide to buying with a £5k deposit.
The withdrawal charge: why you can lose more than the bonus
Take money out for any reason other than a first home, reaching 60 or terminal illness, and you pay 25% of the amount withdrawn. That charge applies to the bonus as well as your own money, so you end up with less than you paid in.
| Example: one year's saving, then cashing out | Amount |
|---|---|
| You pay in | £4,000 |
| Government bonus (25%) | £1,000 |
| Pot before withdrawal | £5,000 |
| Withdrawal charge (25% of £5,000) | −£1,250 |
| You receive | £3,750 |
| Loss of your own money | £250 (6.25%) |
The Treasury says more holders have lost savings to this charge than have used a LISA to buy a home, which is a big reason it wants to replace it.
We are not tax advisers and this is not tax advice. The withdrawal charge example is a general summary based on the rules published at the time of writing, ignoring interest or growth, and we make no warranty about what you will receive. Speak to a qualified tax adviser or accountant about your own circumstances.
What if the house costs more than £450,000?
The cap is on the purchase price, and it hasn't changed since the LISA launched in 2017. If the price is even £1 over, you can't use your LISA for that home without the 25% charge.
Your options if you're over the cap
- Look at homes under £450,000
- Or negotiate the price down before exchange. The price on the contract is what counts.
- Keep the LISA for later
- Buy using other savings and leave the LISA untouched until 60, when you can withdraw without a charge.
- Withdraw and pay the charge
- Usually the worst option. Work out the real cost first, using the example above.
Can you use two LISAs to buy a house?
Yes, in two different ways.
Two buyers, one LISA each
Allowed if you're both first-time buyers
You can each use your own savings and bonus on the same home. You must both meet all the rules, and the £450,000 cap still applies to the whole property, not to each share.
One person, two LISAs
Allowed, with conditions
You can hold LISAs opened in different tax years and withdraw from each for the same purchase, as long as each withdrawal meets the rules, including the 12-month wait. You can pay into only one each year.
If you're buying with a partner, see how lenders check deposit sources, including LISA savings and family gifts.
Using your LISA with a mortgage: timing
Mortgage lenders accept LISA savings as a deposit. The catch is timing, because your conveyancer, not you, requests the money.
Lifetime ISA timing rules
From your first payment to completion day
- Tell your broker earlyWe'll show the LISA in your deposit and check the price is under the cap.
- Use a conveyancer who handles LISAsNot all do, and some charge a fee per withdrawal.
- Request the funds in good timeLISA money can fund your exchange deposit. If completion slips past 90 days, extensions of 60 then 30 days are possible.
Our mortgage timeline guide shows where this fits in the wider process.
The new First Time Buyer ISA: what's proposed and what's confirmed
In June 2026 the Treasury consulted on a new First Time Buyer ISA to replace the LISA. The consultation closed on 18 August 2026. The key numbers haven't been set, and the launch date isn't confirmed, although press reports point to April 2028.
| Feature | Proposed First Time Buyer ISA | Status |
|---|---|---|
| Who can open one | First-time buyers aged 18 or over, no upper age limit, buying with a mortgage | Proposal |
| Bonus | Paid when you withdraw to buy, not as you save | Proposal |
| Withdrawal charge | None. Take money out and you just lose the bonus | Proposal |
| Yearly limit, bonus rate, price cap | To be announced at a future Budget | Not decided |
| Launch date | Reported as April 2028 | Not confirmed |
| Existing LISAs | Stay open, and you can keep paying in under current rules | Stated by the Treasury |
Should you wait for the new ISA?
- Buying in the next few years
- Waiting means missing bonuses you could get now.
- Aged 38 or 39
- Opening a LISA before 40 keeps the option open.
- Unsure you'll buy at all
- The 25% charge is a real risk, so a cash ISA may suit you better for now.
Under the proposals, you couldn't transfer a LISA into the new ISA, but you could use both on one purchase and pay into one of them each year.
Other ISAs for first-time buyers, and deposit boosters
- Help to Buy ISA: pay in until November 2029 and claim the bonus by November 2030. You can transfer it into a LISA (counting towards the £4,000 limit), but only one of the two bonuses can go towards your home.
- Cash ISA: the overall ISA allowance is £20,000 for 2026/27. From 6 April 2027, under-65s will be able to put no more than £12,000 of that into cash ISAs. The LISA isn't expected to count towards that cash limit.
- Deposit boosters and family help: some lenders offer family-backed mortgages, where a relative's savings act as security for a set period, or cashback for first-time buyers. Compare the rate as well as the extra. Gifted deposits are common too: see our gifted deposits guide.
We are not tax advisers and this is not tax advice. The ISA allowance and cash ISA limit are a general summary based on the rules published at the time of writing, and we make no warranty about the tax you will pay. Speak to a qualified tax adviser or accountant about your own circumstances.
Lifetime ISA providers: how to choose
Fewer providers offer LISAs than ordinary ISAs, and the Treasury notes that many high street banks and building societies don't. They are mainly savings apps, investment platforms and a handful of banks and building societies.
What to compare
- Cash or investments
- Match the account to when you plan to buy.
- Interest and fees
- Check whether a cash rate includes a temporary bonus, and what platform or fund charges apply.
- Transfers
- Check whether the provider accepts transfers in. Always move a LISA using the formal transfer process, never a withdrawal.
- Protection
- Check the provider is FCA-authorised and how the FSCS covers your money.
Frequently asked questions
Is a LISA or a normal ISA better for a house deposit?
If you qualify and the home will cost £450,000 or less, a LISA usually wins because of the 25% bonus. A cash ISA suits money you might need, or a purchase above the cap.
Do mortgage lenders accept a Lifetime ISA as a deposit?
Yes. Lenders treat it like your own savings. They'll want statements, and your conveyancer arranges the withdrawal.
Can I open a Lifetime ISA after 40?
No. You must open it and make your first payment before your 40th birthday. The proposed First Time Buyer ISA would have no upper age limit.
What happens to my LISA when the First Time Buyer ISA launches?
The Treasury says existing LISAs will stay open and you can keep saving under the current rules.
Make your LISA work with your mortgage
A LISA bonus only helps if the purchase fits the rules and the money arrives on time. Quick Mortgages is a whole-of-market broker, not tied to any lender, with a panel of 110+ lenders and no broker fees. We'll check your price against the cap, plan your deposit and keep your conveyancer on track.
Read more about our first-time buyer mortgages, or try our mortgage search tool.
Sources
- GOV.UK, Lifetime ISA guide: £4,000 limit, 25% bonus up to £1,000, age rules, £450,000 cap, 12-month rule, 25% withdrawal charge and examples, buying with someone else
- GOV.UK, Help to Buy ISA: payments until November 2029, bonus claims until November 2030, £250,000 or £450,000 in London
- GOV.UK, Individual Savings Accounts: £20,000 allowance for 2026/27
- HMRC, Conveyancers: first time residential purchase with a Lifetime ISA (30-day payment, 90-day completion and extensions)
- HM Treasury, First Time Buyer ISA consultation, June 2026 (proposals, existing LISAs, £12,000 cash ISA limit from 6 April 2027)
- MoneySavingExpert, Lifetime ISA guide (multiple LISAs, bonus timing)
- HomeOwners Alliance, reporting on the April 2028 launch
Correct on 17 September 2026 and may change.
Disclaimer:
This article is for general guidance purposes only and does not constitute legal, financial, or professional advice. Mortgage products and their terms can vary, and it is important to seek advice from a qualified, regulated professional who can assess your individual circumstances. Please ensure you consider your unique needs before making any financial decisions.
While every effort is made to ensure that the information provided on this blog is accurate and up-to-date, we do not guarantee its completeness or accuracy. The mortgage market can change rapidly, and the information on this blog may become outdated. We recommend verifying any information before acting on it and seeking tailored advice.
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