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Lifetime ISA vs Help to Buy ISA
If you’re looking to save for your first home in the UK, you might have heard about the Lifetime ISA (LISA).
With Help to Buy ISAs no longer available for new applications and no longer allowing you to pay in from November 2029*, the LISA is one of the best tools to help first-time buyers get on the property ladder.
This isn’t personal advice. Product and tax rules can change, and any benefits will depend on your circumstances. If you’re not sure what’s right for you, then ask for financial advice. All investments can fall as well as rise in value, so you could make a loss.
What is a Lifetime ISA?
Introduced in 2017, the LISA is for people looking to save for their first home or later life. You can open one from ages 18-39 and contribute up to £4,000 each tax year up until you’re 50, with a 25% government bonus on all your contributions. So, if you max your allowance, you’ll get an additional £1,000.
One of the standout features is the more relaxed property value limit of £450,000 across the UK.
What is a Help to Buy ISA?
The Help to Buy ISA was introduced in 2015, designed just to help get savers onto the property ladder. Although it closed to new applications in 2019, existing holders can still add to theirs before December 2029.
This ISA offers a 25% bonus on a maximum of £12,000 saved. After opening you could contribute up to £1,200 in the first month and then £200 per month after that until 30 November 2029.
One of the key differences is that the Help to Buy ISA only allows cash savings, and has stricter property price limits - capped at £250,000 (£450,000 in London). Additionally, the bonus is paid only during the property purchase process, unlike the LISA where bonuses are credited a few weeks after each contribution.
Lifetime ISA vs Help to Buy, at a glance
| Feature | Lifetime ISA | Help to Buy ISA |
|---|---|---|
| Type | Cash or Stocks and Shares | Cash only |
| Max subscription | £4,000 per tax year | Closed to new accounts |
| Property value limit | £450,000 | £250,000 (£450,000 in London) |
| Opening age | 18-39 | Closed to new accounts |
| Contribution age limit | 50 | No age cap on contributions |
| Bonus payment amount | 25% on each contribution (up to £1,000 per tax year) | 25% of amount saved (up to a maximum of £3,000) |
| Bonus payment timing | A few weeks after each contribution | At property purchase completion |
| To retain or receive the cash bonus | Eligible for first home purchase, from age 60, terminal ill health | Must be used for an eligible first home purchase |
| Status | Open for new accounts | Closed for new accounts |
Remember, for any withdrawal from a LISA not for an eligible first home purchase before age 60, there’s usually a 25% withdrawal penalty. Also, your LISA needs to have been open for at least 12 months before you can use it towards your first home.
Can you have both a Lifetime ISA and Help to Buy ISA?
Yes, you can have both a Help to Buy ISA and a LISA at the same time, but you can use the bonus from only one of them towards your first home.
If you already have both and are saving towards your first home, the LISA is generally more beneficial because of the bigger bonus and the flexibility of contributing until age 50. That’s as long as you’ve had it open for at least a year.
If you decide to transfer cash from your Help to Buy ISA into a LISA, remember the amount you transfer will count towards your yearly £4,000 subscription limit.
If you’re interested in saving towards your first home, take a look at our award-winning LISA.
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