The First-Time Buyer ISA: What the 2026 Consultation Proposes
The First-Time Buyer ISA is the government’s planned replacement for the Lifetime ISA; no start date has been set, its consultation closed on 18 August 2026 and the response is still to come. Existing holders can keep paying in under the current rules, and the key numbers have not been decided.
Nothing is final yet, and some of the most important numbers are still missing. Here is what has been proposed, what has not been decided, and what it means if you already have a Lifetime ISA.
The Lifetime ISA and the proposed First-Time Buyer ISA
| Lifetime ISA (now) | First-Time Buyer ISA (proposed) | |
|---|---|---|
| Who can open | Age 18 to 39 | 18 or over, no upper age limit |
| Used for | A first home up to £450,000, or from age 60 | A first home bought with a mortgage |
| Bonus | 25% added as you save, up to £1,000 a year | Paid when you buy, based on what you paid in |
| Taking money out early | 25% charge | No penalty, you just don’t get the bonus |
| Yearly limit, price cap, bonus size | £4,000, £450,000, 25% | Not yet decided |
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 is being proposed
The First-Time Buyer ISA would be for buying a first home only, using a mortgage. The main proposed features are:
- Open to anyone aged 18 or over, with no upper age limit. The Lifetime ISA, by contrast, 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 to your account as you save.
- Because the bonus is only paid at the point of purchase, there is no withdrawal penalty. If your plans change, you can take your own money out without losing any of it. You simply would not receive the bonus.
- The bonus would be based on what you have paid in, less anything you take back out, not on any investment growth.
What has not been decided
This is the honest part. Three of the numbers that matter most are still blank: how much you will be able to pay in each year, the maximum property price that will qualify, and how large the bonus will be. The government has said these will be set at a future fiscal event. Until then it is not really possible to compare the new account with the Lifetime ISA, which today pays a 25% bonus on up to £4,000 a year. These figures are correct at the time of writing and can change, so check gov.uk for the latest position.
How it fits with the new cash ISA rules
From April 2027, the cash ISA allowance for under-65s falls to £12,000, within an unchanged overall £20,000 ISA allowance. A cash First-Time Buyer ISA would count towards that £12,000 cash limit, and the same anti-circumvention rules that apply to other ISAs would apply here too. 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. You can keep paying in under the existing rules, and you can still open a new Lifetime ISA now, because the replacement has no start date yet. You would not be able to move a Lifetime ISA into the new account, since it has already received a bonus, but the government has proposed that you could put money from both towards the same home. I explain the current product in full in The Lifetime ISA Explained.
Where the consultation stands
This was a consultation, not a finished law, so the government asked for views before setting the rules. It closed on 18 August 2026, and at the time of writing the government has not published its response, so none of the detail is fixed yet. The consultation document, and the response when it lands, are 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 with no start date, and numbers that are not yet set, 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.
