The LISA replacement: everything first-time buyers need to know

The Government will continue to support first-time buyers saving for a deposit but the end is coming for LISAs. On 23rd June 2026, the Government opened its consultation on the LISA replacement, called the First Time Buyer ISA (FTB ISA). Here’s everything we know so far.

What is a LISA?

A LISA (Lifetime Individual Savings Account) is a tax-free way of saving for a property deposit or your retirement. For every £1 you save, the Government adds 25p. You can deposit up to £4,000 every year – so the maximum Government annual contribution is £1,000. It is possible for savers to withdraw money from a LISA for reasons other than to buy a property or retire but this carries a financial penalty.

When are LISAs ending?

LISAs will be phased out and the new FTB ISAs introduced in 2028, with an expected date in April.

Why are LISAs being scrapped?

In 2025, the Treasury Select Committee reviewed the effectiveness of LISAs and found they were flawed. It said having one product with a dual use - a deposit or retirement - meant some savers chose unsuitable investment strategies. 

It also found many savers were unfairly penalised because they encountered financial hardship and needed to withdraw money from their LISA unexpectedly. The unauthorised withdrawal penalties saw more LISA holders lose part of their original savings than purchase a house.

Additionally, HMRC found awareness of a LISA’s withdrawal conditions was low among those holding accounts, while the penalties also put others off opening a LISA.

Is anything going to replace LISAs?

The Government will replace LISAs with a new FTB ISA. The old LISA scheme will close to new applicants when the replacement product is launched. The Government’s consultation documents give a good indication of what to expect in 2028.

FTB ISAs explained

As its name suggests, the new FTB ISA will be exclusive to first-timer buyers purchasing a property with a mortgage. A FTB ISA won’t be a way for people to save for their retirement. There will be both cash, and stocks and shares options. Plus, there will be no upper age limit.

The Government will also contribute to FTB ISAs. The percentage has not been confirmed and we still don’t know how much a saver can deposit every year. It’s also unclear what the maximum purchase price will be when using a FTB ISA. For context, LISAs currently have a UK-wide upper price cap of £450,000.

The Government has intimated the upper purchase price cap for Help to Buy (H2B) ISAs, LISAs and the new FTB ISAs will be the same.

FTB ISA Government contributions will be paid differently. The cash bonus will only be fulfilled when the saver buys a property. And cash withdrawals for uses other than to buy a property won’t incur a penalty. 

As with LISAs, a FTB ISA will need to be open for 12 months before the saver can use the money.

Will FTB ISAs be subject to the new ISA rules?

Yes, FTB ISAs will be subject to the same rules. The Autumn Budget 2025 announced the annual cash ISA limit for individuals under 65 would be set at £12,000. This starts from 6th April 2027. The overall annual ISA limit will remain at £20,000. Any other money will need to be saved in a stocks and shares ISA. 

What happens to my money held in a LISA after they’re replaced?

LISAs will continue for existing users after they have been closed to new applicants. Savers can continue to pay money into the LISA indefinitely and enjoy the same 25% top up from the Government. The money saved will be safe, and can be used as intended when they opened the LISA.

Is it possible to have a LISA and its replacement at the same time?

It should be possible for current LISA holders to also open a FTB ISA. Details suggest LISA funds and those in a new FTB ISA can be used for the same purchase. There is a caveat – savers will only be able to save into one ISA in the same tax year.

It’s also thought those who have an old H2B ISAs will be able to transfer their funds to the new FTB ISA. A LISA won’t be transferable.

Talk to us about buying your first property. As well as offering deposit advice, we can work out what you might be able to afford using your current financial circumstances.