Chancellor John Healey confirmed the government’s backing for those looking to save a deposit for their first home, via the new First Time Buyer ISA from April 2029.
The product will retain the generosity of the Lifetime ISA, allowing contributions of up to £4,000 a year with a 25% government bonus. The bonus will be paid on the value of the account balance when funds are withdrawn for a qualifying first home purchase, up to the value of £450,000, so avoiding the need for any withdrawal charge. The new product will have no upper age restriction.
In recognition that some Lifetime ISA holders may wish to purchase a property above the £450,000 property price cap, the government will from 29 October 2026 allow Lifetime ISA funds to be withdrawn for such purchases which otherwise meet the qualifying rules, with a reduced withdrawal charge of 20%, ensuring the value of individual contributions is protected if the value of the property is above the price cap.
Commenting on the proposed ISA changes Paula Higgins, CEO of HomeOwners Alliance said:
“We welcome the removal of the additional penalty for Lifetime ISA savers buying a home above the £450,000 limit. People saving responsibly for their first home should not lose part of their own savings simply because local property prices exceed the cap.
“However, it is disappointing that the £450,000 property price cap will remain unchanged for both existing Lifetime ISAs and the new First Time Buyer ISA, which will replace the LISA for new accounts from April 2029. Londoners buying above that threshold will continue to miss out on the government purchase bonus.”
She added: “The cap should reflect London’s housing market, rising to £500,000 in outer London boroughs and £650,000 in inner London boroughs. This is consistent with what will likely be the property price caps for the Your First Home Scheme. It should then increase annually in line with inflation to protect future buyers and prevent the value of this support from being steadily eroded.”
Additional help for first time buyers was also announced in the shape of the Your First Home scheme,
