Lifetime ISA vs Help to Buy ISA: Which Is Better for First-Time Buyers?
The Help to Buy ISA closed to new applicants in November 2019, so the Lifetime ISA (LISA) is now the primary government bonus scheme for first-time buyers. If you still hold a Help to Buy ISA, understanding both schemes is important for choosing how to deploy your savings.
Lifetime ISA (LISA)
- ►Open to 18–39 year olds; save up to £4,000 per year
- ►Government adds a 25% bonus (max £1,000/year)
- ►Property price limit: £450,000
- ►Bonus paid on withdrawal to buy a first home or at age 60+
Pros
- ✓Higher annual savings limit and bonus cap than Help to Buy ISA
- ✓Can be used to buy properties up to £450,000
- ✓Usable for retirement savings if not used for a property
Cons
- ✗25% withdrawal penalty if used for anything other than a first home or retirement (effectively losing the bonus plus ~6.25% of your savings)
- ✗Cannot be used for buy-to-let
- ✗Only valid for new-builds and existing properties up to £450,000
Best for: First-time buyers under 40 saving for a property or as a retirement top-up with no plans to access funds early.
Help to Buy ISA
- ►Closed to new applicants November 2019; existing accounts valid until November 2029
- ►Government adds 25% bonus (min £1,600 saved, max £3,000 bonus)
- ►Property price limit: £250,000 (£450,000 in London)
- ►Bonus paid on completion (not exchange) via your solicitor
Pros
- ✓Bonus paid on a monthly basis as you save (no annual lump sum requirement)
- ✓No withdrawal penalty for non-property uses (bonus is simply not claimed)
- ✓Low minimum balance to trigger the bonus (£1,600)
Cons
- ✗Closed to new applicants — no longer available
- ✗Lower property price caps outside London
- ✗Maximum bonus of only £3,000
Best for: Existing account holders who opened one before 2019 — worth keeping open and using before the November 2029 deadline.
Bottom Line
If you do not already hold a Help to Buy ISA, the Lifetime ISA is the only government bonus scheme available to first-time buyers. If you hold both, you can use the Help to Buy ISA bonus but only for a qualifying property — the LISA provides the higher bonus ceiling.
Frequently Asked Questions
Can I have both a LISA and a Help to Buy ISA?
Yes, but you can only use the government bonus from one scheme towards a single property purchase. Most buyers use both accounts to save but apply only one bonus at completion.
What happens to my LISA if I do not buy a property?
You can withdraw your LISA at age 60 penalty-free to use as retirement income, or transfer it to another LISA provider. If you need the money earlier for any other reason, the 25% penalty applies.
Does a LISA affect my mortgage affordability?
Your LISA funds count as part of your deposit, which can improve your loan-to-value ratio and give you access to better mortgage rates. The account balance itself does not negatively affect lender affordability calculations.
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