If you're saving to buy your first home in the UK, you need to know about the government bonus schemes available to first-time buyers. The Help to Buy ISA (H2B ISA) and the Lifetime ISA (LISA) both offer a 25% government bonus on your savings — but the rules, limits, and practical implications are quite different. Here is a clear, up-to-date comparison.
Help to Buy ISA: What You Need to Know
The Help to Buy ISA is closed to new applicants since 30 November 2019. If you did not open one before that date, it is not available to you. If you are an existing holder, here is how it works:
- Government bonus: 25% on savings used to purchase a qualifying home
- Monthly contribution limit: £200/month (with a one-off initial deposit of up to £1,200 in the first month)
- Maximum government bonus: £3,000 (on £12,000 of savings)
- Property price cap: £250,000 (£450,000 in London)
- When the bonus is paid: at completion only, via your solicitor. The bonus is not paid at exchange — a common and costly misunderstanding. You need the cash at exchange from your own savings; the bonus arrives at completion.
- Deadline to claim: existing holders can claim the bonus on a property purchase until 30 November 2030
The Help to Buy ISA was a straightforward savings vehicle but its limitations — lower property price cap and lower bonus ceiling — made it less effective than the LISA for most buyers in higher-cost areas.
Lifetime ISA (LISA): The Current Option
The Lifetime ISA is open to any UK resident aged 18–39 (you can continue contributing until age 50 once opened). It can be used for two purposes: buying your first home, or retirement from age 60.
- Government bonus: 25% on contributions (paid monthly)
- Annual contribution limit: £4,000 per tax year
- Maximum annual government bonus: £1,000/year
- Maximum lifetime bonus (to age 50): £33,000 (if opened at 18 and contributed maximum every year)
- Property price cap: £450,000
- First-time buyers only: you must not have previously owned a home in the UK or abroad
- Minimum account age: 12 months from account opening before using for a property purchase
The LISA Withdrawal Penalty
This is the most important thing to understand about the LISA. If you withdraw funds for any reason other than a qualifying first home purchase or retirement from age 60, you are charged a 25% withdrawal penalty.
The penalty sounds like it simply reverses the government bonus — but it does not. The 25% is charged on the full withdrawal amount including the bonus. The net result is that you lose 6.25% of your own original contributions.
Example: You contribute £4,000. The government adds £1,000. Total: £5,000. A 25% penalty = £1,250 deducted. You receive £3,750 — £250 less than you originally saved.
Do not open a LISA unless you are confident you will either buy a qualifying property or leave the funds until retirement.
Direct Comparison: LISA vs Help to Buy ISA
| Feature | Help to Buy ISA | Lifetime ISA |
|---|---|---|
| Open to new applicants? | No (closed Nov 2019) | Yes (age 18–39) |
| Annual contribution limit | £2,400 (£200/month) | £4,000 |
| Max government bonus | £3,000 total | £1,000/year |
| Property price cap | £250k (£450k London) | £450k |
| When bonus is paid | At completion | Monthly |
| Can use for retirement? | No | Yes (from age 60) |
| Penalty for other withdrawals | None (just lose the bonus) | 25% of full amount (net 6.25% loss on contributions) |
| Who can open? | Existing holders only | UK residents aged 18–39 |
Which Is Better for a First-Time Buyer in 2026?
For anyone who did not open a Help to Buy ISA before November 2019, there is no choice — the LISA is the only government-bonus savings vehicle available.
For existing H2B ISA holders deciding what to do, the LISA is better for most people:
- Higher property price cap: £450,000 vs £250,000 (£450,000 in London) — outside London, the H2B ISA price cap rules out a large proportion of the market
- Higher annual bonus: £1,000/year vs a maximum of £600/year under the H2B ISA
- Retirement fallback: if your plans change, LISA savings can be used for retirement at 60
The main reason to keep contributing to an H2B ISA is if you already have one, the property you're targeting is under £250k (or under £450k in London), and you want to avoid the LISA withdrawal penalty risk.
Can You Have Both?
Yes — if you opened a Help to Buy ISA before November 2019, you can also hold a LISA. However, you can only use one government bonus per property purchase. Most buyers in this situation choose to use the LISA bonus (higher), and close or retain the H2B ISA as a standard cash savings account.
Stocks and Shares LISA vs Cash LISA
The LISA is available in two forms:
Cash LISA: Savings earn interest (typically 3–5% AER in the current market). Low risk, predictable returns. Suitable if you plan to buy within 1–3 years.
Stocks and Shares LISA: Savings are invested in funds. Higher potential returns over a longer period, but value can fall as well as rise. Suitable if you have 5+ years before you plan to buy, or if you are treating the LISA as a retirement vehicle.
The government bonus is applied to both types equally. For a 3-year house purchase target, a cash LISA is lower risk. For a 7-year timeline or longer, a stocks and shares LISA may generate better returns.
How to Open a Lifetime ISA
The LISA is not available from high street banks. Approved providers as of 2026 include:
- Moneybox — cash and stocks & shares LISA, mobile-first
- AJ Bell — stocks and shares LISA
- Nutmeg — stocks and shares LISA
- Paragon — cash LISA
You can transfer a LISA between providers without penalty (and without losing the bonus), so you are not locked in to your initial choice.
Open the account as early as possible — the 12-month minimum holding period before using for a property purchase means you want the account open well before you start making offers.
Once you've saved your deposit and found the right property, the next challenge is planning the renovation. Whether it's modernising a new build or tackling a full refurbishment, Renovate Me gives you a step-by-step roadmap to plan and manage the works from day one.