Lifetime ISA or Help to Buy: ISA?

If you are saving for a first home, the choice between a Lifetime ISA and a Help to Buy ISA has already been made for you in one direction: the Help to Buy ISA closed to new savers on 30 November 2019 and is not available to new applicants from 1 December 2019¹. Only people who already hold one can still use it, and only to compare against what they could do instead.

Both schemes pay a 25% government top-up on what you save³. The Lifetime ISA lets you put in more each year, up to £4,000, so the bonus can reach £1,000 a year, and it can be used towards a home costing up to £450,000 anywhere in the UK⁴. The Help to Buy ISA bonus is capped by its own monthly saving limits and by a property price ceiling of £250,000 outside London and £450,000 within London⁶.

The practical question for most people is not which scheme is better in the abstract, but what to do with an account they already have, and whether to move it. A Help to Buy ISA can be transferred into a Lifetime ISA, but not the other way round without a charge, and only one of the two bonuses can go towards a first home⁵.

Help to Buy ISA is closed to new savers: only existing holders can compare

The Help to Buy ISA was open for new savers until 30 November 2019, and it has been open to new contributions since then only for people who already held one¹. It is closed to new savers, and no new applicant can open one². The scheme was replaced by the Lifetime ISA, which became available in April 2017¹.

For an existing holder, the account still works. You can keep saving into it until 30 November 2029, and the government bonus must be claimed by 1 December 2030¹. That gives a long runway, but a hard end: after the claim deadline the bonus is gone, though the money you saved remains yours.

The Help to Buy ISA was only ever available to first-time buyers, and each first-time buyer could open only one during the lifetime of the scheme¹. The bonus applies both to the amount saved and to the interest built up while the account is open, and it is calculated and paid when you buy your first home¹. It can only be used towards a property the first-time buyer will live in as their only residence, not a buy-to-let, and that condition is enforced by the scheme administrator¹.

One structural limit is worth knowing if you are weighing up what to do next: the Help to Buy ISA is a cash ISA, and the rules at launch allowed a saver to subscribe to only one cash ISA per year¹. The Lifetime ISA sits outside that restriction in the sense that it is its own product type, which is part of why transferring across is possible at all.

Lifetime ISA and Help to Buy ISA side by side

The two products share a headline number and diverge on almost everything behind it. Both offer a 25% government top-up on savings³. The Lifetime ISA pays that top-up on contributions up to £4,000 a year, so the maximum bonus is £1,000 a year, and it is paid annually⁴. The Help to Buy ISA bonus is calculated on the balance when you buy, including interest, and is paid at that point¹.

The Lifetime ISA is designed to encourage saving for two significant life events: buying a first home and retirement¹⁰. You must be 18 or over but under 40 to open one, and you can keep paying in until you turn 50⁸. You can only pay into one Lifetime ISA per tax year, though you are free to hold accounts with different providers⁴.

The Help to Buy ISA, by contrast, was a single-purpose product aimed at a first home, with a lower price ceiling outside London that has not moved with the market. That ceiling is the single biggest practical difference for anyone buying in much of England.

Property price limits: £450,000 for a Lifetime ISA, £250,000 outside London for Help to Buy

The Lifetime ISA can be put towards a home worth a maximum of £450,000 in all areas of the UK¹. The same £450,000 cap applies to a first home purchase using Lifetime ISA savings, and it is the figure used across the official guidance⁵. The government's own assessment is that the property price cap supports most first-time buyers across the UK¹¹.

The Help to Buy ISA works differently depending on where you buy. The property must cost no more than £250,000 outside London and £450,000 within London⁶. The same split appears in the scheme's own guidance: no more than £450,000 in London, and up to £250,000 in the rest of the UK¹². The £250,000 figure outside London is the one that catches people out, because it has not been uprated since the scheme launched.

For a buyer in London the two schemes line up at £450,000. For a buyer anywhere else in the UK, the Lifetime ISA allows a property worth £200,000 more than the Help to Buy ISA does, which is the difference between £450,000 and £250,000⁵.

There is a further condition on the Lifetime ISA that does not apply to the Help to Buy ISA. You cannot use your savings to buy a home if you are getting a private mortgage from a relative, including a parent, grandparent, child, grandchild or sibling, someone married to or in a civil partnership with your relative, your spouse or civil partner, a relative of your spouse or civil partner, or someone married to or in a civil partnership with a relative of your spouse or civil partner⁵. A family loan that looks like a private mortgage can therefore disqualify the purchase, even where the property price is within the cap.

Can you have both, and only one bonus towards your first home

You can hold both a Help to Buy ISA and a Lifetime ISA, and you can pay into both types of account during the same tax year¹³. They can be with different providers¹³. What you cannot do is take two government bonuses towards the same first home.

The rule is consistent across official guidance and the providers that administer the accounts: you can only use the government bonus from one of them to buy your first home⁵. Savers can save into both a Help to Buy ISA and a Lifetime ISA, but will only be able to use the government bonus from one of the two accounts to buy a first home¹. The same restriction appears in the Scottish scheme guidance, where the amount saved plus any bonus can be used for a purchase, but only the government bonus from one ISA can be used to buy a first home¹⁶.

The declaration is built into the paperwork. An account investor must declare they are not also claiming a bonus under a Help to Buy ISA, or has repaid any such bonus in full, as part of the first-time buyer withdrawal declarations¹⁷. In practice this means choosing which account to claim from before the purchase completes, and the choice is usually driven by which bonus is larger.

Moving a Help to Buy ISA into a Lifetime ISA

A Help to Buy ISA can be transferred into a Lifetime ISA, and you can transfer all of it or just some of it¹³. The transfer counts towards the £4,000 Lifetime ISA allowance for that tax year, but not against your overall ISA allowance¹⁴. The money you have paid into your Help to Buy ISA during the tax year already counts towards your overall £20,000 ISA allowance, so moving it across does not use up any more of that allowance¹⁸.

The direction matters. You can transfer money from a Help to Buy ISA to a Lifetime ISA, but if you transfer money from a Lifetime ISA to a Help to Buy ISA you will have to pay the 25% withdrawal charge⁵. A transfer out of a Lifetime ISA into another type of ISA before age 60 also triggers the 25% charge⁵.

There was a one-off concession when the Lifetime ISA launched. During the 2017-18 tax year only, those who already had a Help to Buy ISA could transfer funds built up before 6 April 2017 without those balances counting towards the Lifetime ISA contribution limit, and the government bonus applied to the full value transferred¹⁹. Contributions made on or after 6 April 2017 could still be transferred, but they count against the Lifetime ISA contribution limit for the year of transfer¹⁹. That window has closed, so a transfer today follows the ordinary rules.

The Financial Ombudsman Service has published a case study involving a customer who transferred an existing Help to Buy ISA into a Lifetime ISA and was told they would receive the government bonus on the full amount transferred²⁰. It is a useful illustration of how the transfer is meant to work, and of the kind of dispute that can arise when a transfer is handled badly.

The 25% Lifetime ISA withdrawal charge and when it applies

The Lifetime ISA's flexibility is narrower than a normal ISA's, and the charge is the reason. You can withdraw money from your ISA if you are buying your first home, aged 60 or over, or terminally ill with less than 12 months to live⁵. Withdraw for anything else before 60 and you pay a 25% charge⁵.

The charge is calculated on the amount you withdraw, and it recovers the government bonus you received on your original savings⁵. If you withdraw the entire pot, the 25% charge applies to the total amount in the ISA, including the government bonus⁵. The effect is that you can get back less than you put in.

The official worked example makes this concrete. Assuming no growth, initial savings of £800 earn a 25% government bonus of £200 and give a pot of £1,000; withdrawing the entire pot means a government withdrawal charge of £250, leaving £750⁵. For a partial withdrawal, withdrawing £160 means a 25% withdrawal charge of £40 and £120 in cash to meet the bill, so you have to withdraw more than the amount you need to cover both your needs and the charge⁵.

There are exceptions where no charge applies. The legislation sets out that there is no withdrawal charge for a withdrawal after a specified age, for a first-time residential purchase, on terminal illness, after death, or on a transfer to another Lifetime ISA²¹. If a Lifetime ISA holder is terminally ill and has less than 12 months to live, they can withdraw all of the funds including the bonus without a government charge, with evidence from a medical practitioner¹⁹. If you die, your Lifetime ISA ends on the date of your death and there is no charge to withdraw the funds or assets⁵.

The charge also has a purpose stated in policy terms: it ensures the Lifetime ISA has been used for its intended purposes, homeownership for first-time buyers or later life savings¹¹. The Financial Ombudsman Service has published a case study about an unexpected withdrawal charge when transferring money between different ISA types, which is the kind of complaint that reaches it when the charge is not understood in advance²⁰.

What happens to a Lifetime ISA if you do not buy a home

Nothing forces you to close a Lifetime ISA if the purchase does not happen. There is no requirement for Lifetime ISA users to close an account after a house purchase, and the same applies if you never buy at all¹¹. The account can simply keep running.

The money can be left in place and taken from age 60 for any purpose, tax-free²². You can continue to pay into the account until you turn 50, and the subscription limit stays at £4,000 until April 2031⁴. The Lifetime ISA is intended for house purchase and saving for retirement, either in the alternative or in combination, so using it for retirement alone is within its design²³.

If you need the money before 60 and you are not buying a first home, the 25% withdrawal charge applies, as set out above⁵. That is the trade-off: the bonus is generous while the money stays in the account or goes towards a qualifying home, and it is clawed back if you take the money out early for something else.

Lifetime ISA replacement: what the planned First Time Buyer ISA means for savers

The government has announced that it is replacing the Lifetime ISA with a new savings product specifically to help first-time buyers²⁵. The new product is described as a new, simpler ISA product to support first-time buyers to buy a home, and once available it will be offered in place of the Lifetime ISA²⁶.

For anyone holding a Lifetime ISA now, the important part is what does not change. It will remain possible to open a Lifetime ISA until the new product becomes available, and for account holders to continue to save into their Lifetime ISA in line with the existing rules indefinitely²². The Lifetime ISA subscription limit stays at £4,000 until April 2031⁹.

That means a saver does not need to rush a decision. The account keeps working, the bonus keeps being paid on contributions, and the withdrawal rules stay as they are. The consultation on the First Time Buyer ISA is the mechanism through which the detail of the replacement will be settled¹⁹.

The Lifetime ISA was introduced in 2017, and individuals can open and pay into one per tax year and are free to have multiple accounts with different providers¹¹. The government has announced that it is replacing the Lifetime ISA with a new savings product specifically to help first-time buyers, described as a new, simpler ISA product to support first-time buyers to buy a home, and once available this new product will be offered in place of the Lifetime ISA¹². The Lifetime ISA's own terms are not affected in the meantime: the maximum contribution is £4,000 per tax year, the government adds 25% on top up to a maximum bonus of £1,000 a year, and withdrawals for anything other than a first home purchase or after age 60 are charged 25% of the amount withdrawn¹³.

Where to get help

If a Lifetime ISA or Help to Buy ISA has been mis-sold, transferred incorrectly, or a withdrawal charge has been applied unexpectedly, a complaint goes first to the provider. If it is not resolved, the Financial Ombudsman Service can look at it; it publishes quarterly complaints data that includes cash ISAs, including cash lifetime ISAs and Help to Buy ISAs, which recorded 620 complaints opened in Q1 2026/27²⁷.

The Consumer Council offers guidance on savings accounts for consumers in Northern Ireland⁹. MoneyHelper provides free, impartial guidance on savings and ISAs for consumers across the UK.