UK accounts· United Kingdom
Lifetime ISA rules in 2026, and what may replace it
Short answer
You can open a Lifetime ISA from 18 until your 40th birthday, pay in up to £4,000 a year until 50 and get a 25% government bonus. Take money out for anything other than a first home, turning 60 or terminal illness, and a 25% charge costs you 6.25% of what you paid in. HM Treasury plans to replace it with a First Time Buyer ISA. Its limits and bonus aren't set yet.
The Lifetime ISA (LISA) is still open to new savers, and the rules below are the ones on GOV.UK for the 2026/27 tax year (6 April 2026 to 5 April 2027). Its future is less settled. In June 2026 HM Treasury said the government “is withdrawing the LISA as there is evidence that the product is not working well for many”, and it asked for views on a First Time Buyer ISA to take its place. ISAs, the LISA included, are covered in the app’s UK accounts topic.
The Lifetime ISA rules for 2026/27
- You can open one if you’re 18 or over but under 40 and live in the UK. Your first payment has to go in before your 40th birthday.
- You can pay in up to £4,000 each tax year until you’re 50. That counts toward your £20,000 ISA allowance, and you can only pay into one Lifetime ISA in a tax year.
- The government adds a 25% bonus, up to £1,000 a year.
- The account can hold cash, stocks and shares, or a mix of both.
- For a first home, the property has to cost £450,000 or less, and the purchase has to come at least 12 months after your first payment. You have to be buying with a mortgage, with a conveyancer or solicitor acting for you; the provider pays the money to them.
- Two first-time buyers can each use their own Lifetime ISA, bonus included, toward the same home.
- You can take money out without a charge from age 60, or if you’re terminally ill with less than 12 months to live. There’s no charge when the account is paid out after death either.
- Any other withdrawal, or a transfer to another type of ISA before 60, carries a 25% charge.
Two smaller rules apply as well. If you also have a Help to Buy ISA, only one of the two bonuses can go toward your first home. And the mortgage can’t be a private one from a relative, or from your spouse or civil partner.
What the 25% charge costs you
The charge is 25% of the whole amount you take out, bonus included, so it takes back more than the bonus added. On £1,000 paid in, the arithmetic runs like this:
- You pay in £1,000, and the government adds 25%: £250. The account holds £1,250.
- You take it all out before 60, for something other than a first home. The charge is 25% of £1,250, which is £312.50.
- You get back £937.50. That’s £62.50 less than you paid in, or 6.25%.
The percentage is the same at any amount, because you get back 1.25 × 0.75 = 0.9375 of what you put in. GOV.UK’s own example uses £800: with the £200 bonus the pot is £1,000, the charge is £250 and you’re left with £750, which is £50 (6.25%) less than you saved.
Interest or investment growth sits in the same pot, so the charge takes 25% of that too. Taking out part of the pot works the same way. To have £120 for a bill, GOV.UK’s example says you’d withdraw £160, because the £40 charge comes out of the withdrawal.
The £4,000 limit is fixed until April 2031
Paragraph 2.3 of the Budget 2025 overview of tax legislation and rates says annual subscription limits “will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2031.” The June 2026 consultation then said that, until the new product is available, “it will remain possible to open a LISA and LISA holders will be able to save into their LISA in line with the existing rules indefinitely”.
The First Time Buyer ISA that may replace it
HM Treasury opened its First Time Buyer ISA consultation on 22 June 2026 and closed it on 18 August 2026. When we checked on 15 October 2026, the page still said “We are analysing your feedback”, and no response had been published. Set against today’s rules, the proposals look like this:
| Rule | Lifetime ISA (rules now) | First Time Buyer ISA (proposed, June 2026) |
|---|---|---|
| Who can open one | Aged 18 to 39 | Aged 18 or over, with no upper age limit |
| Annual limit | £4,000, inside the £20,000 | To be confirmed |
| Bonus | 25%, up to £1,000 a year | Rate to be confirmed; paid when you withdraw to buy, on what you paid in minus withdrawals |
| Property price cap | £450,000 | To be confirmed, and aligned across the Lifetime, Help to Buy and First Time Buyer ISAs |
| Waiting period | Buy at least 12 months after your first payment | Bonus only once the account has been open a year |
| Taking money out for something else | 25% charge | No charge, and no bonus on that money |
| Purpose | A first home, or retirement from 60 | A first home only, bought with a mortgage |
| Cash or stocks and shares | Either, or both | Both versions intended |
What’s announced, what’s proposed and what’s a guess
Sorted by how firm each part was on 15 October 2026, the plan looks like this.
The government has announced three things. The new product will be “offered in place of the Lifetime ISA (LISA)” once it’s available. Until then you can still open a Lifetime ISA and keep saving into it “in line with the existing rules indefinitely”, and Budget 2025 fixed its £4,000 limit until 5 April 2031.
The right-hand column of the table is proposed, apart from the cells marked to be confirmed, and could change after the consultation. So are the rules for people with both accounts. You could hold a Lifetime ISA and a First Time Buyer ISA but “only be able to save into one in the same tax year”, and you couldn’t transfer Lifetime ISA money across, because it has “already received a government bonus”. You could use both “for the same purchase”, and Help to Buy ISA holders could transfer into the new product, up to its limit.
The numbers and the date aren’t decided. “Subscription limits, property price caps and the level of the government bonus will be announced at a future fiscal event to take account of market conditions and wider public finance context.” There’s no launch date either; the consultation says only that the government wants the product available “as soon as practically possible”.
The launch date has only been guessed at. MoneySavingExpert’s First Time Buyer ISA guide, updated 25 June 2026, says April 2027 “looks the likely launch date” but that it doesn’t know yet. The next fiscal event is the Budget on 28 October 2026, and nothing we’ve read says whether it will set the new ISA’s numbers.
What the plan could mean for an existing Lifetime ISA
One proposal would change the Lifetime ISA itself. The consultation says that “regardless of where the property price cap is set, the FTB ISA, LISA and Help to Buy ISA cap will be aligned so that no account holders will lose out.” So the Lifetime ISA’s £450,000 cap could move when the new cap is announced.
A Lifetime ISA can hold cash, and from 6 April 2027 savers under 65 face a £12,000 annual limit on cash ISAs. The documents we read don’t say whether payments into a cash Lifetime ISA will count toward that limit, though the consultation says a cash First Time Buyer ISA would. Our guide to the £12,000 cash ISA limit covers that change.
Saving for a deposit with the bonus
Say Mei is 27 and wants £20,000 toward a deposit. If she pays £4,000 a year into a Lifetime ISA for four tax years, she puts in £16,000 and the bonus adds £4,000 (25% of £16,000), so she reaches £20,000 before any interest. Saving the same £20,000 without a bonus would take £5,000 a year. Starting in 2026/27, her four years end in 2029/30, inside the period the £4,000 limit is fixed for.
The bonus comes with the conditions above. The home has to cost £450,000 or less, and if she takes the money out for something else before 60, the 25% charge leaves her with £15,000: £1,000 less than she paid in.
Scroll is education, not advice. Our lessons and calculators explain how money works in general. They don’t know your circumstances, so they can’t tell you what to do with yours. For that, speak to a qualified, regulated adviser in your country.
We’ll update this page when HM Treasury publishes its response to the consultation, and after the Budget on 28 October 2026 if it sets the new ISA’s limits, bonus or price cap.
Drafted with AI assistance. Every figure was checked against the sources listed, on 14 October 2026.