Chancellor John Healey has confirmed a new Individual Savings Account (ISA) for first-time buyers in Labour’s 2026 Autumn Budget. The First Time Buyer ISA will launch in April 2029, alongside a much earlier change for existing savers buying a home above £450,000.
For withdrawals made on or after 29th October 2026, the charge on Lifetime ISA money used for a first home above that price cap will fall from 25% to 20%, provided the purchase otherwise meets the qualifying rules. The regulations implementing the change were laid before Parliament on Budget day.
I would pay close attention to the two dates. The First Time Buyer ISA is a future savings product. The reduced charge could affect a purchase already under way, so speak to your account provider and conveyancer, the legal professional handling the purchase, before moving money or changing a completion plan.
What the First Time Buyer ISA will offer
Announcing the change to Members of Parliament, Healey said: “I’m announcing that a first time buyer ISA will replace the lifetime ISA.” The words were reported in Sky News’ live coverage.
The Treasury’s consultation response, published alongside the Budget on 28th October, settles several details left open when the replacement account was consulted on earlier this year.
The First Time Buyer ISA will allow up to £4,000 of contributions each tax year. A government bonus of 25% will be calculated on the final account balance, including interest or investment growth, with a maximum bonus of £20,000.
Buyers must be at least 18, but there will be no upper age limit. The home must be in the United Kingdom and cost no more than £450,000, the account must have been held for a year, and the purchase must use a mortgage. The design provides for the bonus at exchange of contracts, with 90 days from claiming it to complete the purchase.
Because the government bonus is paid at the purchase stage, the First Time Buyer ISA will have no withdrawal charge. Existing Lifetime ISA holders will be able to continue using their accounts under the current rules when the replacement becomes available.
Those are material differences for anyone deciding how to build a deposit. Today’s Lifetime ISA requires the first payment before age 40, allows contributions until age 50, and adds the government bonus as people save. It can also be used for later life.
The £450,000 limit stays
There is no increase in the property price cap. The Treasury’s response says it considered calls to increase, index, regionalise or remove it, but will retain £450,000 for both products.
Rachael Griffin, tax and financial planning expert at Quilter, welcomed the withdrawal-charge change but questioned the unchanged ceiling. Responding to the Budget in Financial Reporter, she said: “But retaining the £450,000 property cap risks carrying an old problem into a new product.”
The First Time Buyer ISA therefore changes the way support is paid without raising the maximum qualifying purchase price. If you are searching above that level, the new account does not make those homes eligible for its bonus.
What a 20% Lifetime ISA charge actually means
The government’s tax announcement confirms that the reduced charge applies to purchases above the Lifetime ISA price cap. Other unauthorised withdrawals retain a 25% charge.
Here is a simple illustration, ignoring interest and investment movements. A saver has paid in £20,000 over several tax years and receives £5,000 of government bonuses, giving £25,000. A 25% charge takes £6,250, leaving £18,750. At 20%, the charge is £5,000 and the saver keeps £20,000.
That is why a five-point cut in the charge matters: in this example it stops the saver losing £1,250 of their own contributions. It still removes the government bonus. It is not permission to keep the bonus when buying any home at any price.
We also need to keep the savings announcement distinct from the Your First Home equity-loan scheme. The names are similar, but an account for saving a deposit and a government loan towards a purchase do different jobs. If you are considering a particular property, our guide to buying a house explains the planning checks that sit alongside the finance.
Healey’s 2026 Autumn Budget supplies the policy decisions. The Treasury says legislation is planned before the First Time Buyer ISA launches, while the already made Lifetime ISA regulations apply to qualifying withdrawals from 29th October 2026. Buyers should check the updated withdrawal process with their provider and conveyancer.
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