HM Treasury's consultation on a new First Time Buyer ISA (FTB ISA) closed on 18 August 2026. The product was trailed at the Autumn Budget 2025 and is proposed to be offered in place of the Lifetime ISA (LISA) once available.
The headline design is now reasonably clear: a single-purpose, house-purchase-only ISA, available from age 18 with no upper age limit, with the government bonus paid at the point of purchase rather than accruing during the savings period, and no early withdrawal charges.
The headline numbers are not clear at all. The subscription limit, the property price cap and the bonus rate have all been deferred to "a future fiscal event" — so the three variables that determine whether this is better or worse than a LISA for a given client are the three we do not have.
The immediate adviser message is unchanged and time-sensitive: clients who are eligible for a LISA and may benefit from one should consider opening one now, because existing LISAs can be funded under existing rules indefinitely, whereas the LISA closes to new applicants when the FTB ISA launches.
Why replace the LISA?
The Treasury's case rests on evidence that the LISA is not working as intended:
Unauthorised withdrawal charges reached 8% of all accounts opened in 2024–25, and are rising year on year.
More LISA holders have lost part of their original capital as a result of the early withdrawal charge than have used the product to buy a house. Provider data shows thousands making repeated unauthorised withdrawals.
HMRC research found low awareness of withdrawal conditions, with unauthorised withdrawals typically driven by financial distress — unemployment or debt repayment.
The 2025 Treasury Select Committee report concluded the design was flawed: the dual house-purchase/retirement purpose raises the risk of unsuitable investment strategies, and the withdrawal charge causes confusion and capital loss where circumstances change unexpectedly.
Provider participation was lower than expected — many high street banks and building societies never offered the product, so eligible savers were not reached.
The proposed rules
Whilst we do not yet know the final rules for the FTB ISA, the consultation papers suggest the following.
Product and eligibility
Feature | Proposal |
|---|---|
Purpose | First home purchase only — no retirement use |
Age | 18 or over to open; no upper age limit, and no upper age for subscriptions |
Residence | UK residents only |
Account types | Cash and Stocks & Shares versions both intended |
Opening | Standard ISA account-opening process; National Insurance number required |
Tax treatment | Growth and income tax free; bonus also tax free. Currently the LISA is exempt from the charge on interest on cash deposit that comes into effect in April 2027. However, it is currently proposed that the anti-circumvention rules will apply to the FTB Stocks & Shares ISA. |
Allowance | Subscriptions count towards the £20,000 overall ISA allowance. Subscriptions to the FTB Cash ISA will count towards the Cash ISA subscription limit of £12,000. |
Home purchase | Purchase must be with a legal mortgage — cash purchases are excluded |
Holding period | Account must have been open 12 months before a bonus can be claimed |
Accounts per year | One LISA or FTB ISA subscribed to per tax year |
Bonus payments
When compared to the LISA, this is probably the most significant structural change:
The bonus is paid at the point of withdrawal for a qualifying purchase, not monthly during the savings period.
It is calculated on net subscriptions — money paid in, less any withdrawals made before the bonus is claimed — and explicitly not on the account value. Investment growth and interest attract no bonus.
HMRC calculates the bonus from ISA manager reporting; the bonus is claimed by and paid to the ISA manager, which then releases funds to the conveyancer.
Payment is at exchange, on LISA-style timing, with 90 days from claiming the bonus to completion. If the transaction does not complete or falls through, the conveyancer must return the bonus and funds to the ISA manager, and the ISA manager must return the bonus to HMRC.
There is no early withdrawal charge. A client whose circumstances change simply takes their money out and forgoes the bonus.
Interaction with existing ISA products
LISA transfers in are prohibited. LISA funds have already received a bonus, and this rule prevents a second one.
But both can be used for the same purchase. A client may hold a LISA and an FTB ISA and apply both to one property — they simply cannot subscribe to both in the same tax year.
Help to Buy ISA transfers in are permitted, up to the subscription limit, mirroring the existing HTB-to-LISA transfer rules.
Stocks & Shares ISA transfers: not permitted into a Cash FTB LISA
Price cap alignment: wherever the new cap lands, the FTB ISA, LISA and Help to Buy ISA caps will be aligned, so no existing account holder loses out. Couples can continue to combine products, subject to the single property price cap.
Areas of greatest uncertainty
1. Bonus rate, subscription limit and price cap: All three are deferred to a future fiscal event. Without them, no meaningful comparison with the LISA is possible.
2. Timing: There is no confirmed launch date. The consultation says only that the government wants the product available "as soon as practically possible".
3. Price cap indexation: The cap will be aligned across all three products, but nothing has been said about whether it will be uprated. The £450,000 LISA cap has been frozen since 2017.
4. Treatment of existing LISAs long-term: Existing LISA holders can subscribe "indefinitely in line with the existing rules". What is less clear is the long-run administrative future of a closed book.
Other points to consider include:
Eligibility triage. Any client aged 18–39 who might conceivably buy a first home, or who wants the retirement option, should consider whether to open a LISA before the window closes. A £1 subscription preserves the ability to fund “indefinitely”. This is the single most time-critical action arising from the announcement.
Timing of the bonus payment. For a client saving over eight or ten years, receiving the bonus at the end rather than after the month of subscription is a real reduction in value.
Existing LISA holders can use both. Where a client already holds a LISA, the ability to run an FTB ISA alongside it and apply both to one home purchase is a potential planning opportunity, subject to the one-account-per-tax-year subscription rule.
We now await the government’s response to the feedback from the consultation. If you have any questions, please contact our Technical Services Department. If you have a question not covered above, or would like to discuss a specific client scenario, please contact Transact Technical Support: Technical_Direct@integrafin.co.uk or call 020 7608 5330.
All information is based on our understanding and interpretation of applicable law and regulation which is subject to change. Tax treatment depends on individual client circumstances and may change in the future.