First-time buyer ISAs and Lifetime ISAs (LISAs) both offer a government bonus on savings, but the rules differ. The right choice depends on your timeline, the property price, and whether you may need to access the money before buying.
How the bonuses compare
The First-time buyer ISA (also called the Help to Buy ISA) pays a bonus of 25% on savings up to £12,000, giving a maximum £3,000. You can save up to £200 a month, with an initial deposit of up to £1,000. The bonus is paid when you complete your house purchase.
The Lifetime ISA pays a 25% bonus on contributions up to £4,000 a year, so you can earn up to £1,000 a year. The bonus is paid monthly, and you can use it for a first home worth up to £450,000 anywhere in the UK. You can open one between ages 18 and 39 and save until 50.
Key differences to consider
The Help to Buy ISA has a property price cap of £250,000 outside London and £450,000 in London. If you are buying above those caps, it will not work for you. The Lifetime ISA has a single £450,000 cap across the whole country.
With a Lifetime ISA, you must use it for a first home or retirement. If you withdraw for any other reason, you pay a 25% penalty. The Help to Buy ISA is more flexible: you can withdraw your savings at any time without penalty, though you lose the bonus if you do not buy a home.
Which one should you pick?
If you are saving for a deposit within a few years and may need the money, the Help to Buy ISA is safer. If you are certain you will buy a home and can wait until you are 60 without needing the cash, the Lifetime ISA gives a larger bonus over time.
You can only use one of the two to buy a home, so you cannot combine the bonuses. The Lifetime ISA also counts towards your annual ISA allowance, while the Help to Buy ISA is separate. Check the property price cap and your own plans before deciding.
