Lifetime ISAs are set to be replaced by a new ISA. But if you already have a lifetime ISA, that’s not going anywhere. You’ll still be able to pay in and you’ll still get the 25% bonus when you do.
And there's still time to open one and take advantage of the government bonus.
What are lifetime ISAs being replaced with and when?
An ISA designed to help people buy their first home. We should know more in June/July 2026, then the current plan is for it be available around January 2028.
There are some educated rumours about what the new ISA will look like:
Are there any changes to the government bonus and withdrawal fee?
As far as we understand, the new ISA will still come with a 25% government bonus, but this might be paid when the customer buys their home – that’s still to be decided.
If the bonus is paid later, there may be no need to charge people for withdrawing money when they need it. Which could be a game changer.
If you take money out of a lifetime ISA for anything other than buying your first home, the government takes 25% of the money you withdraw as a fee. With the new ISA, you may have the flexibility to take money out if you need it without paying this penalty charge.
That could be a big advantage of the bonus being paid later, but it does mean the bonus won’t be in your account building interest or investment returns.
Is the property price cap being removed or reduced?
It’s possible that with the new ISA, you’ll be able to buy a property worth more than £450,000, which is the most you can spend on your home if you’re using a lifetime ISA (if you spend more than this, you’ll be charged the withdrawal fee).
There might be different limits for different regions to reflect house prices.
Will you be able to use the new ISA for retirement?
The replacement ISA is likely to just be for people wanting to buy their first home, while lifetime ISAs can also be used to save extra money for retirement.
Can I keep my lifetime ISA?
Yes. The government has confirmed that existing lifetime ISAs will be unchanged. You’ll still get the bonus as you save.
It’s unlikely you’ll be able to open a new lifetime ISA once the new ISA launches.
What does OneFamily think of the change?
We’ve been campaigning for two crucial changes to lifetime ISAs and it looks like the new ISA may come with these updates.
They are:
- Increasing the property price cap (the £450,000 limit on the amount you can pay for a home if you’re using a lifetime ISA)
- Reducing, or even removing, the withdrawal charge so that if people need their money, they can get it
Our CEO, Jim Islam, explains how these two changes could benefit first-time buyers:
LISA changes are urgently needed to kick-start the first-time buyers’ market. Young adults are facing high rents and soaring property prices, so the government must give them a leg-up.
The lifetime ISA (LISA) is a superb investment account that could be the solution. It helps young people to grow their savings and get onto the housing ladder, and they can earn a bonus of up to £1,000 a year.
But if they have to dip into their nest-egg in an emergency then account holders are hit with a hefty penalty of 25%. They don’t just lose the bonus, but also a sizeable chunk of their hard-earned savings - and our customers tell us that this puts them off LISAs.
It would be fairer to reduce the penalty to 20%, so they only lose the bonus that they’ve accrued.
The outdated LISA house price cap needs to be reviewed too. It was set in 2017 and house prices have risen massively since then. The price cap works against those who have no choice but to live in a location where homes cost more.
By updating the LISA, it could become an essential tool in helping the next generation to move out of rented accommodation and into the stability of their own homes.
- Jim Islam, OneFamily CEO
Is it still worth opening a lifetime ISA?
If you want to buy your first home and you’re aged 18-39, lifetime ISAs are still one of the best ways to save a mortgage deposit.
You get a 25% bonus every time you pay in and, as you can pay in up to £4,000 each tax year, that bonus could add an extra £1,000 to your first home fund every year you’re saving.
At this moment in time, you can still open a lifetime ISA and it’s the only product that comes with a first-time buyer government bonus. It’s looking likely that with the new ISA you’ll get the bonus when you’re ready to buy, unlike lifetime ISAs which come with a monthly bonus (as long as you’ve paid in that month).
Even when lifetime ISAs are replaced, the government has confirmed that existing customers will still be able to use their lifetime ISAs as they can currently. Which means you’ll still get the bonus.
So, there’s no need to wait for the new product before you start building your deposit.
Open a OneFamily Lifetime ISA
There's still time to take advantage of the Lifetime ISA 25% government bonus, worth up to £1,000 a year!
Our Lifetime ISA invests in stocks and shares, so the value is likely to go up and down over time. This is normal for this type on investment, but it means there is a risk you could get back less than you put in if you withdraw at a time when the value is lower.