Britain’s proposed First Time Buyer ISA still has three blanks to fill

A new savings account for first-time buyers is taking shape in Britain, but it is not ready to open. The most eye-catching parts of the label are also the parts nobody can price yet.

HM Treasury’s proposed First Time Buyer ISA would eventually be offered instead of the Lifetime ISA. It would keep a government bonus for a qualifying first-home purchase, remove the Lifetime ISA’s charge on other withdrawals and open the product to adults of any age. Yet the bonus rate, annual subscription limit and maximum eligible property price have all been left for a future fiscal event.

That makes this a consultation, not a product launch. Responses close on 18 August 2026. No provider can yet offer the account, and no saver can compare its return with an existing Lifetime ISA because three central settings are undecided.

The current Lifetime ISA remains available in the meantime. Under today’s rules, someone must make their first payment before turning 40, can contribute up to £4,000 a year until age 50 and receives a 25% government bonus. A qualifying first-home purchase must usually cost £450,000 or less, use a mortgage and take place at least 12 months after the first payment. The account can also be used for later life.

Its difficult feature is the withdrawal charge. Taking money for a reason outside the permitted routes usually triggers a 25% charge on the amount withdrawn, including the government bonus. Because the charge applies to the enlarged pot, it can remove some of the saver’s original contribution as well as recover the bonus. The Treasury says unauthorised withdrawal charges reached 8% of all Lifetime ISA accounts opened in 2024-25, and that more holders had lost part of their own savings than had used the product to buy a home.

The proposed account changes the timing. Savings would go into a First Time Buyer ISA without an immediate government top-up. The bonus would be calculated from net subscriptions, meaning contributions minus earlier withdrawals, and paid only when the money is released for an eligible purchase. Ordinary withdrawals would carry no special charge, but money taken out would no longer support a future bonus.

This is a meaningful design difference, not free extra flexibility. The bonus would still be reserved for a first home bought with a legal mortgage. The account would have to be open for at least 12 months. A conveyancer would verify eligibility and handle the withdrawal, with completion normally required within 90 days of claiming the bonus. A cash-only purchase or an unregulated financing arrangement would not qualify under the proposal.

The Treasury wants both cash and stocks-and-shares versions. Interest and eligible investment growth would remain tax-free inside the ISA wrapper, while contributions would count towards the wider annual ISA allowance. Investment value can fall as well as rise, so a stocks-and-shares version would not turn a planned deposit into a guaranteed amount.

The missing numbers matter because they shape who benefits. A higher bonus could provide more support, but its usefulness depends on how much a person may subscribe and which homes fall below the price cap. A lower cap can exclude buyers in expensive areas. A lower annual limit can restrict how quickly the bonus-eligible balance grows. The consultation explicitly asks how those three elements should be balanced rather than presenting a settled answer.

The transition is also less tidy than the phrase “replace the Lifetime ISA” suggests. The Treasury says Lifetime ISA holders would be able to keep contributing under the existing rules indefinitely. They would not be able to transfer a Lifetime ISA into the new account because its funds have already received a government bonus. They could hold both and use both towards the same qualifying purchase, but could subscribe to only one of the two account types in the same tax year.

Existing Help to Buy ISA holders face a different route. New Help to Buy ISAs have long been closed, although current holders can pay in until November 2029 and claim a bonus until November 2030. The consultation proposes allowing those balances to transfer into a First Time Buyer ISA, subject to the new account’s eventual subscription limit.

There is another unresolved edge for anyone considering investments rather than cash. The proposed transfer framework would not allow money to move from a stocks-and-shares First Time Buyer ISA into a cash version. The Treasury acknowledges this could stop a buyer close to purchase from reducing market exposure through that kind of transfer. It is asking respondents about the difficulty, which is another reason not to regard the consultation diagram as a finished rulebook.

For now, the useful distinction is between direction and detail. The direction is clear: a home-only ISA, no upper age limit, no penalty for taking back ordinary savings, and a government bonus held until a qualifying purchase. The detail that decides the value of the offer is not clear: how much can go in, what percentage the state adds and which property price qualifies.

A product name can make policy sound operational before providers have an account to sell. This one still has three blank spaces on its most important line. Until they are filled and final rules appear, comparisons with a Lifetime ISA are necessarily incomplete.