Is the Lifetime ISA being scrapped? That’s the question hundreds of savers have been asking since the Autumn Budget 2025. The short answer is no, but significant changes are coming. Here’s everything you need to know about what’s changing, what’s staying the same, and what it means for your savings strategy.
This is an important planning topic, but to be clear: the current Lifetime ISA product remains unchanged for now. On 23 and 24 June 2026, the government formally launched its consultation on a new First-Time Buyer (FTB) ISA, with an expected launch around April 2028.
➤ Current LISAs continue indefinitely – No cut-off date for existing accounts
➤ You can still open a new LISA – Eligibility rules unchanged (ages 18-39)
➤ New First-Time Buyer ISA coming April 2028 – Officially named and consultation launched June 2026
➤ Retirement savings feature removed – The new product will be first-home purchase only
➤ Withdrawal penalty being removed – Currently 25%, eliminated in the new product (confirmed)
➤ Bonus structure changing – From monthly payments to a lump sum at purchase (confirmed)
➤ Key details still under consultation – Property price cap, government bonus percentage, annual contribution limit, and final implementation legislation have not yet been finalised
Bottom line: If you’re eligible for a LISA, there’s no reason to delay opening one. In fact, opening one now under the current rules may give you better long-term returns, even if it’s just to put £1 into the account to secure it before you turn 40.
Is the Lifetime ISA Being Scrapped? What's Really Happening
Why the Lifetime ISA Isn't Being Scrapped: The Government's New Consultation
On 23-24 June 2026, the government formally launched its consultation on the replacement product for the Lifetime ISA, now officially titled the First-Time Buyer (FTB) ISA. The consultation confirms several key details while others remain open for industry and public feedback.
In the Autumn Budget 2025, the government announced a consultation on a new, simpler ISA product designed to support first-time home buyers. The aim is to streamline LISA and address its complexities and criticisms, particularly the controversial 25% withdrawal penalty.
According to official guidance, HMRC has confirmed that:
– The government is consulting on a new product specifically to support first-time buyers
– The current Lifetime ISA will remain available until any new product is launched
– You can continue to open a Lifetime ISA and keep contributing under the current rules until the replacement product is introduced
– Account holders can continue to contribute to their existing LISAs without any restrictions
The June 2026 consultation has now provided greater clarity on the new product’s structure, though the final rules are not yet finalised and will depend on feedback received during the consultation process.
When Will Lifetime ISA Changes Take Effect?
Following the June 2026 announcement, the government has confirmed that the new First-Time Buyer ISA is expected to launch around April 2028. This timeline could be affected by:
– The consultation process and feedback received
– Legislative approval timelines
– Technical implementation requirements
– Political and economic conditions
What This Means for 2026-2027
- Current Lifetime ISAs do not stop or close
- There is no immediate deadline to open or fund a LISA this year
- People can still open and contribute to a Lifetime ISA under existing rules
- No urgency from a regulatory cut-off perspective
Although reform is on the horizon, there is no panic deadline in 2026 or 2027.
Lifetime ISA Changes: What's Different in the First-Time Buyer ISA
The June 2026 consultation has now confirmed several key differences between the current Lifetime ISA and the planned replacement product.
Lifetime ISA Retirement Feature Being Removed (But Not Scrapped)
The replacement ISA will be designed exclusively to support first-time home purchase saving, removing the existing LISA’s dual purpose of home buying and retirement saving.
What this means:
- New savers after the launch date (around 2028) will not be able to use the new product for retirement
- Existing LISA holders can continue using their accounts for retirement under current rules indefinitely
- People saving for retirement will need to rely on pensions or standard ISAs instead
Bonus Structure Changing: From Monthly to Lump Sum
Instead of receiving the 25% government bonus periodically throughout the year (which allows your bonus to earn interest or investment returns alongside your contributions), the new product will pay the bonus as a lump sum when you complete your house purchase.
What this means:
You would miss out on years of compounding growth on your bonus. This could potentially reduce your overall savings pot by hundreds of pounds, depending on how long you save before buying.
Example comparison: Let’s say you save £4,000 per year for 5 years, with an average annual interest rate of 4%:
Current LISA (monthly bonus with compound interest):
– Year 1: Save £4,000 + receive £1,000 bonus = £5,000 (this earns interest for 5 years)
– Year 2: Save £4,000 + receive £1,000 bonus = £5,000 (this earns interest for 4 years)
– Year 3-5: Same pattern
– Total after 5 years with compound interest: approximately £27,082
Proposed First-Time Buyer ISA (lump sum bonus at purchase only):
– Years 1-5: Save £4,000/year = £20,000 total contributed
– Your £20,000 grows with 4% interest to approximately £21,665
– The government adds a £5,000 bonus at the point of house purchase
– Total: approximately £26,665
Difference: You could have around £417 less with the new structure due to losing compound growth on the annual bonuses over five years.
The longer you save before buying, the bigger this difference becomes.
NOTE: This illustration assumes a constant annual return of 4% and regular contributions. Actual returns will depend on investment performance or savings interest rates.
Withdrawal Charges Being Removed
The current 25% withdrawal penalty for non-qualifying withdrawals will be eliminated in the new product, removing one of the most common criticisms of the current LISA.
Why the penalty can be removed:
Under the proposed new product, the government will only pay the 25% bonus when you complete your house purchase. This means all the money in your account before that point is entirely yours; you haven’t received any government money yet. Therefore, there’s no need to penalise you for withdrawing your own money if your circumstances change.
Under the current system, you receive the 25% bonus immediately each year, which is why the government needs to reclaim it (plus an additional amount to offset the lost bonus) if you withdraw for non-qualifying purposes.
What this means:
– Greater flexibility if your circumstances change (e.g., you decide not to buy, or you exceed the property cap)
– No risk of getting back less than you contributed if you need to access funds early
– Makes the product less risky for people with uncertain timelines
Current LISA penalty example:
– You save £4,000 and receive a £1,000 bonus = £5,000 total in your account
– If you withdraw early for non-qualifying reasons: £5,000 minus 25% penalty (£1,250) = £3,750 returned to you
– You get back less than you originally put in
Proposed new product:
– No penalty means you’ll get back what you contributed, just without receiving the bonus
This is arguably the biggest improvement in the new product design, particularly for savers who value flexibility.
Current LISA vs First-Time Buyer ISA: Side-by-Side Comparison
| Feature | Current LISA (2026) | First-Time Buyer ISA (~2028) |
|---|---|---|
| Purpose | First home OR retirement | First home ONLY |
| Bonus payment timing | Monthly/periodic (compounds over time) | Lump sum at purchase |
| Withdrawal penalty | 25% on non-qualifying withdrawals | Removed |
| Annual contribution limit | £4,000 | Unknown (likely £4,000) |
| Government bonus | 25% (up to £1,000/year) | Unknown (likely 25%) |
| Property price cap | £450,000 | Unknown (may be updated) |
| Age eligibility to open | 18-39 | 18+ (no upper age limit confirmed) |
| Can use for retirement? | Yes (age 60+) | NO for new accounts |
| Status | Available now | Consultation phase (June 2026 onwards) |
| Availability | Indefinite for existing accounts | Expected around April 2028 |
Cash and Stocks & Shares Options
Under the current rules, both Cash Lifetime ISAs and Stocks & Shares Lifetime ISAs remain available, offering different risk and return profiles depending on your preference. A Cash LISA provides certainty and safety, with interest earned on your savings, while a Stocks & Shares LISA offers the potential for higher long-term growth through investment in stocks, bonds, and funds. Which is right for you depends on your risk tolerance, timeline, and investment experience.
Why Your Lifetime ISA Isn't Being Scrapped: What Continues in 2026
Individuals aged 18-39 can still open a Lifetime ISA under the current rules
– Save up to £4,000 per tax year and receive a 25% government bonus (up to £1,000 annually)
– You can use the account towards a first home purchase (up to £450,000) or access it from age 60 for retirement
– The existing Lifetime ISA remains available indefinitely until the government launches the new product
– All current withdrawal rules, including the 25% penalty, remain in place
More on Lifetime ISA
What Does the First-Time Buyer ISA Mean for You?
Cash and Stocks & Shares Options
If You’re a First-Time Buyer
Good news:
– The new product should work better for you with no withdrawal penalty
– More forgiving if your circumstances change (e.g., relationship breakdown, job loss, property price changes)
– Likely still includes a 25% government bonus (to be confirmed)
Action Steps:
1. Consider opening a LISA now under current rules to start earning the 25% bonus with monthly compounding and benefit from tax-free growth, rather than waiting until 2028 for the lump sum structure, which offers less overall return
2. Start saving early to maximise both the bonus and compound interest benefits
3. Monitor updates to the £450,000 property cap, as many experts expect the government to increase it to reflect current house prices (this is still under consultation)
4. Watch for confirmation of:
– The property price cap (currently £450,000 – under consultation)
– Final bonus percentage for the new product (likely 25%, but not yet finalised)
– Annual contribution limits (likely to remain £4,000, but not yet confirmed)
🎯 Action Steps
1. Consider opening a LISA now under current rules to start earning the 25% bonus with monthly compounding and benefit from tax-free growth, rather than waiting until 2028 for the lump sum structure, which offers less overall return.
2. Start saving early to maximise both the bonus and compound interest benefits.
3. Monitor updates to the £450,000 property cap, as many experts expect the government to increase it to reflect current house prices (this is still under consultation).
4. Watch for:
- Confirmation of the property price cap (currently £450,000 – under consultation)
- Final bonus percentage for the new product (likely 25%, but not yet finalised)
- Annual contribution limits (likely to remain £4,000, but not yet confirmed)
If You're Saving for Retirement (Age 60+)
Keep your existing LISA:
– You can continue contributing indefinitely under current rules
– The retirement feature will remain available for your existing account
– No forced closure or conversion to the new product
New savers after 2028:
– May need to look at alternative retirement products such as personal pensions or regular Stocks & Shares ISAs
– The new product likely won’t support retirement savings as a qualifying withdrawal option
Consider this: If you’re planning to save for retirement and are eligible to open a LISA now (ages 18-39), it may be worth opening one before the new product launches to preserve the retirement option. By opening now, you’ll benefit from:
– Immediate 25% government bonus on contributions (up to £1,000 per year)
– Tax-free investment/savings growth – all interest and investment returns grow completely tax-free
– Tax-free withdrawals from age 60 – unlike pensions, which are subject to income tax on withdrawal
– Dual flexibility – you can still use it for a first home if your plans change before age 60
This gives you a powerful retirement savings vehicle that may not be available to new savers after the replacement product launches.
However, a pension may still be more suitable for many retirement savers because pension contributions generally receive tax relief (between 20% and 45% depending on your income), which can significantly boost your retirement pot. Which option is best depends on your personal circumstances, income level, and tax position. Consider seeking advice from a qualified financial adviser if you’re unsure which approach suits your situation.
Read More
If You're Unsure About Your Timeline
Current LISA:
– 25% penalty on early withdrawals for non-qualifying purposes
– High risk if you’re not certain about your home-buying timeline or whether you’ll stay within the property price cap
New product (expected 2028):
– No penalty, significantly more flexibility
– Better option if you value adaptability over maximum compounding returns
Consider:
– Your risk tolerance and how certain you are about buying a home within the qualifying criteria
– Whether you’re likely to stay within the £450,000 property cap in your target area
– Your timeline: If you’re planning to buy soon (within 1-3 years), the current LISA could give you better overall returns due to monthly bonus compounding
Frequently Asked Questions
Q: Should I wait until 2028 to open a LISA?
No. If you're eligible (ages 18-39), opening a LISA now means you start earning the 25% bonus immediately, benefit from compounding as your bonus earns interest or investment returns over time, and lock in the dual-purpose feature that allows you to use it for either home buying or retirement. Under the proposed new product, the bonus would be paid only at purchase, significantly reducing your overall returns, and the retirement option would not be available.
Q: What happens to my existing LISA after 2028?
You can keep it and continue contributing under the current rules indefinitely. Your existing LISA will not be closed, converted, or affected by the new product launch.
Q: Will the 25% bonus stay the same in the new product?
Unknown – this remains under consultation. The bonus percentage for the new product hasn't been finalised, though it's likely to remain at 25% given the government's stated goal of supporting first-time buyers. Final confirmation will come once the consultation period concludes.
Q: Can I use my existing LISA for retirement after 2028?
Yes, absolutely. If you already have a LISA, you can continue using it for retirement purposes and access it penalty-free from age 60. The retirement feature is being removed from the new product for new savers, not from existing accounts.
Q: Is the £450,000 property price cap being updated?
This remains under consultation. Many observers and industry bodies have called for the cap to be raised to reflect current house prices, which have risen significantly since the LISA was introduced in 2017. The average property price in the UK is currently around £297,000-£300,000, but this varies dramatically by region. The government will consider feedback on this issue during the consultation period, and a final decision will be made once consultation closes and legislation is drafted.
Q: If I open a LISA now, will I be forced to switch to the new product in 2028?
No. The government has confirmed that existing LISA holders can continue under current rules indefinitely. You will not be required to switch to the new product.
Q: Can I have both a current LISA and the new First-Time Buyer ISA when it launches?
This hasn't been confirmed yet and will depend on the final regulations. Typically, you can have only one active LISA-type account at a time, but we'll need to wait for official guidance once the consultation concludes and the legislation is drafted.
Q: What if I've already maxed out my LISA contributions but want to save more?
You can use your remaining ISA allowance (£20,000 total minus your £4,000 LISA contribution = £16,000 remaining) to save into a Cash ISA or Stocks & Shares ISA. All ISA types offer tax-free growth on savings and investments.
Is There Urgency to Open a LISA Now?
No regulatory deadline exists in 2026 to open or fund a Lifetime ISA. The key consideration for savers is planning, understanding the potential reforms and how they might affect long-term saving strategies.
However, there are strategic reasons you might want to act sooner rather than later:
Why Opening a LISA Now Makes Sense
1. Compounding bonus growth – Monthly bonuses earn interest or investment returns for years before you buy, significantly increasing your total pot
2. Dual-purpose flexibility – Lock in both retirement and home-buying options, giving you maximum future flexibility
3. Certainty of current rulese – No guessing what the final new product will look like or whether it will be as generous
4. Preserving the retirement feature – Opening a LISA now allows you to keep access to the retirement option (available from age 60), which will not be available to new First-Time Buyer ISA holders after 2028
5. Time value – The earlier you start, the more you benefit from compound growth on both contributions and bonuses
6. Higher overall returns – As shown in our example, you could have several hundred pounds more by benefiting from bonus compounding
Why You Might Wait
1. Uncertain timeline – If you genuinely don’t know when you’ll buy a home, the current 25% penalty risk is significant
2. Property cap concerns – If you’re highly likely to exceed the £450,000 cap in your target area
3. Strong preference for flexibility – The new product’s penalty removal is more important to you than maximising returns
Bottom line: For most eligible savers who are serious about buying a home within the property cap in the next 5-10 years, opening a LISA now is financially advantageous. But this is a planning decision based on your circumstances, rather than a looming regulatory cutoff.
Lifetime ISAs continue to be a valuable tool for:
- First-time buyers seeking a government bonus on savings plus compound growth over time
- People saving for retirement who appreciate a tax-efficient structure with tax-free withdrawals
- Those who want the flexibility of both home buying and retirement options under one product (for now)
The government’s consultation and proposal for a new, simpler ISA reflects a genuine desire to refine the product and address legitimate criticisms, particularly the harsh withdrawal penalty that has trapped some savers. But the current Lifetime ISA remains open and fully operational and is likely to remain available until around 2028.
You can continue to open and contribute to a Lifetime ISA today while staying informed about how the reforms progress through the consultation process.
What Should You Do Now?
If You’re Eligible for a LISA (Ages 18-39)
- Consider opening one now to lock in the current rules and start earning bonuses that compound over time
- Subscribe to our newsletter to stay updated on the consultation process and any new developments as they’re announced
- Read our complete LISA series for comprehensive guidance on how to maximise your savings:
✅ Part 1: What is a Lifetime ISA? An Introduction for First-Time Buyers
Understand the basics, eligibility, and benefits of a Lifetime ISA.
- ✅ Part 2: Lifetime ISA for First-Time Buyers: How to Secure Your First Home in the UK
A detailed guide on using your LISA to buy your first home.
- ✅ Part 3: Cash vs Stocks & Shares LISA (2025): How to Choose the Best Lifetime ISA for Your Goals
Compare the two main LISA options to decide which suits your investment goals.
- ✅ Part 4: Understanding LISA Withdrawal Rules and Penalties
Learn the important rules around withdrawals and how to avoid penalties.
- ✅ Part 5: LISA Contribution Limits and Government Bonus Explained
A breakdown of how much you can contribute and how the government bonus works.
- ✅ Part 6: Planning for Retirement with Your Lifetime ISA
Explore how LISAs can be used as part of your long-term retirement plan.
Not Sure If a LISA Is Right for You?
Have questions about the LISA changes or need help with your savings strategy? Drop a comment below or contact us directly for personalised guidance tailored to your specific circumstances and goals.
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