The Government has revealed plans for a new First Time Buyer Individual Savings Account (ISA) to replace the current Lifetime ISA. Expected to be introduced in April 2028, the First Time Buyer ISA will offer a bonus to savers when purchasing their first home, mirroring the functionality of the existing Lifetime ISA.
Unlike the Lifetime ISA, which allows savings for both a first home and retirement, the First Time Buyer ISA will be exclusively dedicated to funding the purchase of a first home and will not serve as a retirement savings vehicle.
Savers can contribute up to £4,000 per tax year into a Lifetime ISA and receive a 25% bonus from the Government, equating to a potential yearly bonus of £1,000. In contrast, the bonus for the new First Time Buyer ISA and any potential updates to the property price threshold remain undisclosed at this time.
While the Lifetime ISA restricts property purchases to those valued at £450,000 or less, calls have emerged for an increase in this limit to keep pace with escalating house prices. Existing Lifetime ISA holders will retain the option to maintain their accounts and continue utilizing them. However, transfers from a Lifetime ISA to the new First Time Buyer ISA will not be permitted, although the accounts can both be used towards the same property acquisition within a tax year, albeit with contributions limited to one account.
Individuals holding a Help to Buy ISA will have the opportunity to transfer it to the First Time Buyer ISA. A public consultation on the First Time Buyer ISA is currently ongoing and set to conclude in mid-August.
Rachael Griffin, a tax and financial planning expert at Quilter, emphasized the importance of allowing savers access to their funds when needed while encouraging them to save for a first home deposit, advocating for a more flexible savings structure.
