The First Time Buyer ISA: What the 2026 Consultation Proposed
The First Time Buyer ISA is the government’s replacement for the Lifetime ISA for new savers, launching in April 2029. Its consultation closed on 18 August 2026, and the government published its response on 28 October 2026. It confirmed up to £4,000 a year, a 25% bonus worked out on the final balance and capped at £20,000, and a £450,000 price cap, at the time of writing.
Here is what the consultation proposed, what the government has now confirmed, and what it means if you already have a Lifetime ISA.
The Lifetime ISA and the First Time Buyer ISA
| Lifetime ISA (now) | First Time Buyer ISA (from April 2029) | |
|---|---|---|
| Yearly limit | £4,000 | £4,000 |
| Bonus | 25% added as you save, up to £1,000 a year | 25%, worked out on the final balance, capped at £20,000 in total |
| Home price cap | £450,000 | £450,000 |
| Taking money out for anything else | 25% charge | No withdrawal charge |
| Who can open one | Age 18 to 39, until it closes to new savers | Age 18 or over, with no upper age limit |
At the time of writing, from HMRC’s tax-free savings newsletter 24 and the design summary in the government’s response (Chapter 3). Check gov.uk for the current rules.
Why the government wants to change it
The Lifetime ISA has helped many people buy a first home, but it has a well-known flaw. If you take your money out for any reason other than buying a qualifying first home or reaching age 60, you pay a government penalty that can leave you with less than you originally put in. A committee of MPs concluded that the product’s design was flawed, and the government now says it is not working well for enough people. The new account is meant to be simpler and fairer.
What the consultation proposed
The consultation, which ran from June to August 2026, proposed an account for buying a first home only, using a mortgage. Its main proposals were:
- open to anyone aged 18 or over, with no upper age limit, where the Lifetime ISA has to be opened before you turn 40
- a cash version and a stocks and shares version, as with the Lifetime ISA
- a government bonus paid when you buy your first home, rather than added as you save, which removes the withdrawal penalty
The government’s response confirmed the age rule, the mortgage rule and the two versions, at the time of writing, and kept the bonus tied to buying a first home, so there’s no withdrawal charge. The one change is how the bonus is worked out: the consultation suggested basing it on what you had paid in, and the government has confirmed it will be worked out on the account’s final balance instead.
What the government confirmed
The account is for buying a first home with a mortgage, and anyone aged 18 or over can open one, with no upper age limit. It comes in cash and stocks and shares versions. The 25% bonus is worked out on the account’s final balance and paid towards an eligible first home purchase. The total bonus is capped at £20,000, and you can hold only one First Time Buyer ISA at a time. Money can be transferred in from a cash, stocks and shares or Innovative Finance ISA, up to the £4,000 yearly limit, and transfers out aren’t limited. Money paid in counts towards your £20,000 overall ISA allowance. I set out the full design in what the government has decided.
How it fits with the cash ISA rules
The Autumn Budget on 28 October 2026 kept the cash ISA limit at £20,000 for all savers over 18, so the planned £12,000 limit from April 2027 won’t go ahead. The overall £20,000 ISA allowance is unchanged. I cover the wider April 2027 changes in the November 2025 ISA reforms article.
What it means if you already have a Lifetime ISA
If you hold a Lifetime ISA, the key message is reassuring: it stays. The Lifetime ISA is planned to close to new savers when the First Time Buyer ISA launches in April 2029, at the time of writing. Until then you can keep paying in under the existing rules, and you can still open a new one. You won’t be able to move a Lifetime ISA into the new account, but you can use money from both towards the same home. I explain the current product in full in The Lifetime ISA Explained.
Where it stands now
The consultation closed on 18 August 2026, and the government published its response on 28 October 2026. It will now put the legislation in place and work with providers on the detail, so details can still change before the account launches. The consultation and the response are both on gov.uk.
What it means in practice
For now, nothing needs to change. If a Lifetime ISA suits your plans, it still works exactly as it did, and holding out for a product that doesn’t launch until April 2029 would mean giving up the bonus you could be earning today. The bigger point is that the support for first-time buyers is not being taken away, it is being redesigned. As ever, this is information, not advice, and the official rules live on gov.uk.
Key takeaways
All figures are correct at the time of writing and can change, so always check gov.uk for the current numbers. The value of investments can go up and down, and you can get back less than you put in. This is general information, not financial advice. If you are unsure, speak to a regulated financial adviser.
