First Time Buyer ISA vs Lifetime ISA (2026): Which Should You Open Before April 2028?

The First Time Buyer ISA isn't a product you can open yet, so the real choice today is between opening a Lifetime ISA (LISA) now and waiting for something that is still a proposal. As of 16 October 2026, the government's consultation has closed, its response hasn't been published, and the bonus, annual limit and property cap for the new account are all unconfirmed (GOV.UK). The replacement is expected around April 2028.

This guide sets the two accounts side by side, separates what's confirmed from what's proposed, and lays out who each suits. It's based on published government material and provider guides, not on us having opened either account.

Quick answer

• Open a LISA now if you're 18–39, expect to buy a home at £450,000 or under with a mortgage, and can leave the money alone for at least 12 months. It's the only account with a confirmed 25% bonus today.
• Waiting may suit you if you're 40 or over, or you expect to buy above £450,000. The proposed account has no upper age limit and the cap is still open, but none of that is confirmed.
• Either way, money you might need for something else is safer outside a LISA, where a non-qualifying withdrawal costs 25%.

What's confirmed, and what isn't

A Lifetime ISA is a tax-free savings or investment account for a first home or later life. You can pay in up to £4,000 a year and the government adds a 25% bonus, worth up to £1,000 a year. Your first payment must be made before you turn 40, and you can keep paying in until 50 (GOV.UK).

The First Time Buyer ISA is the government's proposed replacement. HM Treasury ran a consultation from 22 June to 18 August 2026, and says it is analysing the feedback. So far, per VWV's 29 September 2026 summary:

• It would be for first-time buyers aged 18 or over, with no upper age limit.
• It would come in cash and stocks & shares versions.
• The bonus would be claimed and paid when you buy, not added as you save.
• No withdrawal charge is proposed, and a 12-month minimum account period is proposed.
• Not confirmed: the bonus rate, the annual contribution limit and the maximum property price.

The Lifetime ISA reform article covers the policy background in more depth.

First Time Buyer ISA vs Lifetime ISA at a glance

Sources: HomeOwners Alliance (updated 7 October 2026), VWV (29 September 2026). Terms may change, so confirm current rules before opening anything.

How the Lifetime ISA works in practice

The rules that catch people out are the property conditions. The home must cost £450,000 or less (the cap applies to the full price, even with shared ownership), be bought with a residential mortgage, and be your main home. Cash buyers and buy-to-let purchases don't qualify. Your first payment must be at least 12 months before the purchase (HomeOwners Alliance, 7 October 2026).

Withdraw for any other reason before 60 (apart from terminal illness) and a 25% charge applies. Because it's taken from the whole amount, including the bonus, you lose the bonus and about 6.25% of your own savings. On £100 saved plus a £25 bonus, you'd get back £93.75.

The best cash LISAs were paying roughly 2.6% to 4.75% AER in mid-October 2026, and the top rates include 12-month bonuses. Plum, for example, was paying 4.69% including a 1.58% bonus for the first year, and Tembo 4.00% including a 0.45% introductory bonus. Some building society LISAs pay closer to 2%, such as Nottingham Building Society's online LISA at 2.00% (HomeOwners Alliance, 7 October 2026; Plum, Tembo and Nottingham BS, checked 16 October 2026). Rates are variable and change often, so check the provider's own page before you open one.

What would change with the First Time Buyer ISA

If the proposal goes ahead as described, three things matter most.

The penalty goes away, but so does the monthly bonus. Instead of a 25% charge on early withdrawals, you'd simply not receive the bonus if you don't buy. The bonus wouldn't be added as you go, so there'd be less compounding on it in a cash account.

The age limit disappears. Anyone over 18 buying their first home could use it, which matters for the over-40s who can't open a LISA today.

The detail is still missing. Until the limit, bonus and cap are published, you can't compare the two accounts on value. Moneybox reported in June that those details may be set at a future fiscal event (Moneybox, 24 June 2026). The next one is the Autumn Budget on Wednesday 28 October 2026, though a 15 October preview doesn't say these details will be announced then.

What happens to your Lifetime ISA if you open one now

Providers and the government's own consultation material indicate that existing LISAs will not be closed, and holders can keep contributing under current rules (Tembo, 19 August 2026). The £450,000 cap, 12-month rule and 25% charge would still apply to them.

Two caveats from provider guides. First, a LISA reportedly can't be transferred into the new account, because the bonus has already been paid (Moneybox). Second, VWV notes the government hasn't confirmed how the two accounts will interact, and advises not to assume the new one is available. Treat anything beyond "your LISA stays open" as unconfirmed.

Who should pick what

A LISA may suit you if you're 18–39, are fairly sure you'll buy within the price cap, have a deposit timeline of a year or more, and are comfortable that money inside is hard to reach. The confirmed 25% bonus is the main draw, and a £1 opening payment starts the 12-month clock.

Waiting may suit you if you're over 40 and can't open a LISA, expect to buy above £450,000 (for example in London or the South East), or aren't sure you'll buy at all. You give up a confirmed bonus today in exchange for a possible better fit later, so weigh that honestly.

Neither may suit you if you might need the money soon. A flexible Cash ISA keeps it accessible. From April 2027 the Cash ISA allowance for under-65s falls to £12,000 within the £20,000 overall limit, and Moneybox reports a cash FTB ISA would count towards it. Our Cash ISA allowance cut guide explains the change, and where to hold cash covers current easy-access options.

Where to save money that isn't going into a LISA

Savings above the £4,000 LISA limit, or money you may need sooner, can go in an ordinary ISA with no property rules or LISA-style charge. We've researched two options. Neither is a LISA provider.

Deposit money needed within about five years generally belongs in cash, because a market fall just before you buy could shrink it. Compare apps in our best investing apps UK guide, and see how Budget changes affect younger savers in our Autumn Budget for under-35s explainer.

How to decide, step by step

1. Check your eligibility: are you 18–39 and a genuine first-time buyer?
2. Estimate your purchase price honestly against the £450,000 cap.
3. Decide how much you could lock away. Only pay in money you won't need before you buy.
4. Compare providers' rates and terms on their own pages, including whether a bonus rate is temporary.
5. Revisit after the Autumn Budget on 28 October 2026 and when the consultation response lands.

The bottom line

The Lifetime ISA is the only government-bonus account for first homes that you can open today, and existing LISAs are expected to keep their current rules. The First Time Buyer ISA looks more flexible on paper, with no age limit and no withdrawal charge, but its bonus, limit and cap are unpublished and it is not expected until around April 2028. The choice comes down to your age, your likely purchase price and how much certainty you want.

This is general information, not financial advice. The First Time Buyer ISA is still a proposal and its terms could change. Do your own research and consider speaking to a qualified adviser about your situation. Figures as of 16 October 2026.