Budget 2026
Lifetime ISA after the Budget: the new 20% charge and the First-Time Buyer ISA
Buyers of homes over £450,000 now keep their own money when they use a Lifetime ISA. A new First-Time Buyer ISA follows in 2029. The sums, and the rules that still apply.
The Lifetime ISA's 25% charge used to cost first-time buyers some of their own money if their home cost more than £450,000. From 29 October 2026 it doesn't. Here is the arithmetic.
How the Lifetime ISA works
- Pay in up to £4,000 a year, and the government adds a 25% bonus: up to £1,000 a year. It counts towards your £20,000 ISA allowance.
- The first payment has to be made before you turn 40, and payments and bonuses stop at 50.
- The money can go towards a first home costing £450,000 or less, bought with a mortgage at least 12 months after your first payment, through a conveyancer or solicitor. It can also be taken out from age 60, or if terminally ill.
- Taking money out for any other reason costs a 25% withdrawal charge.
What changed on 29 October 2026
| Before 29 Oct 2026 | From 29 Oct 2026 | |
|---|---|---|
| You pay in | £4,000 | £4,000 |
| Government bonus (25%) | £1,000 | £1,000 |
| Balance | £5,000 | £5,000 |
| Withdrawal charge | £1,250 (25%) | £1,000 (20%) |
| You get back | £3,750 | £4,000 |
| Your own money lost | £250 | £0 |
For an otherwise eligible first-time buyer whose home costs more than £450,000, the charge is now 20% instead of 25%. Every other early withdrawal still costs 25%. The change isn't backdated.
Why 20% matters: the bonus is 25% of what you pay in, which is 20% of the total. So a 20% charge takes back exactly the bonus. A 25% charge took the bonus and some of your own money too.
The First-Time Buyer ISA, from April 2029
The Budget confirmed a new First-Time Buyer ISA from April 2029, expected eventually to replace the Lifetime ISA. As reported: a 25% bonus on up to £4,000 a year, a £450,000 home price cap, no upper age limit to open one, and the bonus worked out on the balance when it's used for a purchase. MSE reports a lifetime bonus cap of £20,000.
Existing Lifetime ISAs carry on: holders can keep paying in and using them. Money can't be moved between the two, but both can go towards the same purchase. The detailed rules are still to be published.
Cash Lifetime ISAs on Juno Hunt
We list cash Lifetime ISAs held directly with the provider, ranked by the provider's interest rate only. The government bonus is the same everywhere, so it's shown separately and never added to the rate. Stocks and shares Lifetime ISAs are investments and aren't listed.
About this article
Rules are from GOV.UK as at 30 October 2026. First-Time Buyer ISA details are as reported after the Budget and may change when the rules are published.
The table ignores interest, which you keep in both cases.
This is general information, not advice: it doesn't take your circumstances into account. Rates and rules can change; the sources below are where to check.
Sources
Some banks pay us when you open an account through our link. That never changes the order of our tables or what this report says.