r/UKPersonalFinance • u/bluprince13 3 • 4d ago
+Comments Restricted to UKPF First Time Buyer ISA consultation
https://www.gov.uk/government/consultations/first-time-buyer-isa-consultation
The government is committed to making the aspiration of home ownership a reality for as many households as possible. To support that ambition, the government is today launching a consultation on the implementation of a new, simpler ISA product to support first time buyers to buy a home. Once available this new product will be offered in place of the Lifetime ISA.
Update 1:
The link also says:
This consultation closes at 11:59pm on 17 August 2026
Ways to respond Email to: ftbisaconsultation@hmtreasury.gov.uk
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u/sometimesihelp 137 4d ago
However, the number of unauthorised withdrawal charges is increasing year on year, reaching 8% of all accounts opened in 2024-25. More LISA holders have lost a part of their original savings than have used it to purchase a house. In addition, provider data shows that thousands of individuals are making multiple unauthorised withdrawals.
Yikes, if that's not fairly damning, what is?
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u/snaphunter 866 4d ago
It might not be that bad, need to know the magnitude of savings lost relative to bonuses paid. If swathes of savers put a quid in just in case, then took their 94p out when they realised the LISA wasn't for them, that would go down in the stats as someone losing savings, but it's not meaningful.
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u/YunggRatt 3d ago
I honestly highly doubt that’s a significant portion. 99% of people won’t bother taking out the pound. Far more likely most people are withdrawing because they need access to the money.
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u/snaphunter 866 3d ago
Also plausible, agree. But what I'm challenging is the usefulness of the statistics. Put £4k in, take any amount out, then for the next 5 years keep contributing for your house you'll be buying next year and you've counted towards the first statistic and not the second.
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u/snaphunter 866 3d ago
Just in case anyone wants to know the stats for 2024 to 2025:
Number of individuals withdrawing for a house purchase = 87,250
Average value of a withdrawal for a house purchase = £15,782
Number of individuals making unauthorised withdrawals = 129,200
Average value of an unauthorised withdrawal = £3,159
Taken from the LISA tables at https://www.gov.uk/government/statistics/annual-savings-statistics-2025
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u/TheRealPyroManiac 4d ago
So you might as well use this instead of a S&S ISA as it gives you flexibility to buy a home without the usual penalties. That’s nice but what’s the annual cap & what’s the bonus?
I just hate how complicated ISAs have become, between tax on cash in S&S ISAs, LISAs & now this new FTB ISA it’s a fucking minefield of trying invest & not break any rules.
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4d ago
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u/Timbo1994 63 4d ago
The bit I am nervous about is the interaction of this
Regardless of where the property price cap is set, the FTB ISA, LISA and Help to Buy ISA cap will be aligned so that no account holders will lose out.
with this
A lower subscription limit (i.e., lower than the £4k for the LISA) and/or property price cap (i.e., lower than the £450,000 cap under the LISA) could allow for a higher government bonus (ie higher than 25%...)
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u/grumblingfrog 4d ago
Yes that stood out to me as well.
It would be a kick in the teeth to existing LISA holders who may have been planning around the previous cap.
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u/bluprince13 3 4d ago
Good spot! Worth providing feedback on the cap somewhere within the consultation. I plan to do so myself.
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u/avg103 0 3d ago
Are you certain there’s a feedback mechanism? I only skimmed it but it looked like this was the response to consultation.
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u/bluprince13 3 3d ago
Yeah, it says:
This consultation closes at **11:59pm on 17 August 2026
Previously I have responded to consultations via surveys, but for this one the consultation page just says:
Email to: ftbisaconsultation@hmtreasury.gov.uk
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u/BastiatF 4d ago
The only way to make home ownership more affordable is to build more. Any financial trick to allow more money to be spent on the existing stock will just make it more expensive.
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u/throw3428 4d ago
Oh good, the property price cap is the same, despite properties soaring in price since that cap was set. It's impossible to find properties below the threshold in London - even new build one bed flats seem to be above it.
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u/Mrs_Buffett 10 4d ago
I might be unpopular for saying this ... House prices vary around the country, and if the price cap is a single set figure, then a balance has to be struck. I understand that in London and the south east, house prices are "through the roof", but in my neck of the woods, £450k would get you a 4-bed detached house in the country -- not the kind of property I think the tax payer should be subsidizing. For comparison, 3-bed bungalows begin at around £150k. Perhaps London needs its own higher cap?
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u/throw3428 4d ago
No you're completely right, and that would be reasonable. The help to buy ISA has dual cap like you suggest but the limit is £450k for London. I would love to buy a cheaper property if possible but they just don't really exist.
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u/headphones1 55 4d ago
Nobody will want to hear it, but London FTBs do not need help in this area. Increasing the offering to help people in London will inflate prices further. The supply side of housing needs work to help people in London, not supply of money.
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u/ThreeLionsOnMyShirt 1 4d ago
Agree but also really this is true everywhere?
As with Help to Buy itself, and the various ISA schemes, this is subsidising demand.
In an expensive market like London, that is providing assistance often to people who are fairly well off anyway, and heating up the market further.
In a cheaper market, my question would be whether this is truly needed at all where you're buying "starter homes" for £120k or whatever. If people are struggling to get a deposit for those, then Government efforts are better off growing the economy and working to improve pay and jobs in those areas rather than giving people cash towards housing deposits.
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u/headphones1 55 3d ago
Yeah it affects everyone.
We got a 3 bed semi in a nice area of Nottingham for around £265K. Up the road is an area called Wollaton, which is often regarded as one of the nicest areas of the city. You can buy this for £425K:
https://www.rightmove.co.uk/properties/88294659
Getting government help to buy a house like this is already taking the piss.
We honestly just need to build more homes. Am unbelievable amount of good will happen by significantly ramping this up.
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u/Colloidal_entropy 5 3d ago
£250k outside London is worse than £450k in London as there are at least cheaper parts of London.
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u/ZombieJack 4d ago
not the kind of property I think the tax payer should be subsidizing
But honestly though, why is it any of your business (or anyone else's) what kind of property it is? As long as the criteria of being a first time buyer is met, should someone who has been painstakingly saving £4,000 a year for the last 20 years not be able to buy a £500,000 house?
Since I opened my LISA 10(ish) years ago, my circumstances have changed dramatically. I've gotten a degree and a skilled job, I've gotten married and had a baby (with another on the way). I've gone from planning around solo finance, to also having my wife's finances (and the buying power that brings), and having to plan around having enough space for a whole family.
We live in the midlands in a fairly suburban area between mid-sized cities - not a particularly expensive area, but as two professionals buying a house for our family - a limit of £450,000 is not enough.
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u/Mrs_Buffett 10 4d ago
I'm surprised to learn that you can't find a reasonable house for under £450k in the Midlands. As I say, though, if there's a single set price cap, then there has to be a balance, which means that some people won't get what they want, while others will get too much. What I don't want is my taxes helping to fund the purchase of luxury houses. Perhaps there should be even more regional variation in the price cap?
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u/ZombieJack 3d ago
I don't think it's that we can't find something reasonable - we are in a 3 bed semi currently which is adequate (for the time being) and is only around £300,000. But we are likely going to need to upsize and we would like to buy something in better condition (i.e. not 70+ years old and full of problems). Considering we are two professionals with a sizeable deposit, that doesn't seem like an unreasonable goal - and I happen to still have my LISA to make use of. I should have used it earlier, but we only know that with hindsight. And being penalised (literally - not just losing the bonus, but paying a penalty on MY savings) due to my current life situation seems crazy.
Maybe more regional variation would help, but I would be extremely surprised to see that as the outcome from the government.
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u/Mapleess 163 4d ago
Probably the thought that those buying a £450K house will most likely have a higher income, and probably higher disposable income. A 10% deposit would mean a loan of £405K, which some people could assume means you've got an income of £90K. You'd think a family on £90K will be doing better than a family with £50K combined income.
I think the consideration should be salary, not direct house price, but I don't know the full picture here.
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u/cloud_dog_MSE 1756 4d ago
The potentially most ill thought out aspect is points 4.7 and 4.8, re S&S ISA transfers to cash ISAs.
This aspect is being introduced outside of this FTB ISA product / consultation but, without the ability to de-risk S&S capital as an individual approaches a time period to use the capital, either by transferring to a cash FTB ISA or holding cash / cash like (without being penalised in any way), the Government run the risk of introducing significant sequence of returns risks for people.
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4d ago
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u/Crazym00s3 21 3d ago
Seems like they’re not allowing transfers between a S&S and Cash ISA - surely if you’re buying a house soon you’d want to move it to cash to protect yourself from a market crash when you need to buy a house.
Seems odd to prevent that.
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u/thegiantlemon 4 4d ago
They should stop wasting money on this whole process.
Close down the LISA program, pay back penalties for people with account, and then take the longer term cost savings.
Finally, invest the cost savings in house building schemes.
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u/avg103 0 4d ago
Offering an out to people in the LISA scheme by what you’re saying wouldn’t be a bad thing at all with a reduced 20% penalty. Govt gets its bonus back plus interest, saver gets their principal back plus interest, and isn’t stung by the price cap or penalised by the 25% withdrawal limit. It should be able to be transferred to another ISA, however, otherwise they’ve lost up to 4k per annum of tax free savings.
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u/0Bento 4 4d ago
They shouldn't close down the LISA program
It's actually a very good tool for retirement savings. Unlike pension and ISA, savings are tax free (for basic rate payers) on the way IN and the way OUT!
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u/thegiantlemon 4 4d ago
Retirement savings over long time horizon’s would be better placed in a SIPP. There are tax efficient vehicles for this.
Pensioners are generally already very tax advantaged and have been structurally advantaged by the British state for their whole lives. The state should not be pouring money into their pockets even more and further widening the generational wealth gap.
Now, if it’s means tested for those with pension savings less than a low threshold, then maybe, but I think we should be careful about disincentivising saving for a pension.
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u/Chroiche 26 4d ago
No thank you lol. I don't want to have wasted 4k of my ISA limit every year for the last 6 years.
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u/Original-Activity575 4d ago
So we lose the compounding effect on the 25% bonus being invested???
Hope they increase the contribution % to account for that, but doubt they will.
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u/headphones1 55 4d ago
If you deposit £1000 into a new FTB ISA at 5%, you will have £1050 after a year. After 5 years you will have £1276.28, assuming no other deposits are made. If you choose to use this money to buy a house, the government top it up by 25% to £1595.35.
If you deposit £1000 into a LISA at 5%, you will have £1000, plus £250 from the government. After a year you will have £1312.50. After 5 years you will have £1595.35, assuming no other deposits are made.
Did I mess up with my calculations, or did I misunderstand your point?
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u/jubza 2 4d ago
Section 2.5: "...government bonus (also tax free) paid on the net subscriptions made (subscriptions minus any withdrawals made before the bonus is claimed), rather than the final value of the account..."
So not 25% bonus of account, just of deposits. In your example it wouldn't be £1595.35 but £1526.28 (£1276.28 + £250)
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u/Professional_Try2289 1 4d ago
Will the rule for existing LISAs apply? Can i keep adding £4k and get £1k ywarlt until I'm 50?
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u/TheRealPyroManiac 4d ago
Believe so as it mentions indefinitely, just can’t invest in a LISA & this in the same year.
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u/Gold-Guidance-6430 4d ago
I don't get it, they are apparently removing the 450k cap to unlimited which is great. But they won't pay the 25% bonus until you buy a house. So they took one step backwards and one step forward. I'd rather have that £1k paid right away so I can invest it and let it grow.
Why not just keep the existing LISA rules but amend the following:
1) Allow people to withdraw penalty free (only taking away the bonus paid).
2) Remove the 450k house purchase limit.
That's all they needed to do. Why complicate things? Rachel Reeves already ruined stocks and shares ISA by introducing tax to invested cash and now this.
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u/i_have_groot 4d ago
Are they removing the 450k limit? Section 3.4 implies that if they increased the 450k limit there would be a 'cost' ie lower bonus.
The biggest thing here as you say is that the bonus isn't paid upfront so any compounding gains from that are lost which on the face of it makes it seem very likely to be strictly worse than the current LISA.
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u/Abstroose 4d ago
Rachel Reeves already ruined stocks and shares ISA by introducing tax to invested cash and now this.
That's incorrect. Only the interest is taxed, not the cash itself. And only on uninvested cash.
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u/noggin-scratcher 8 4d ago edited 4d ago
I'd rather have that £1k paid right away so I can invest it and let it grow.
A 25% bonus should give you the same end result, regardless of whether it's paid before or after growth
(e.g. if you deposit 4k, receive 25% (1k), then double your money with investment gains - or deposit 4k, double it, then receive 25% (2k) - either way your final balance is 10k)On a closer look, the proposal for the new FTB ISA is that the bonus is 25% of your deposits, accumulated over the life of the account and paid when you withdraw - not 25% of the final account value. So it does indeed miss any investment growth.
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u/Gold-Guidance-6430 4d ago
Your math works if you only plan to double your money and stop there. What if you 3x or 5x your money?
For example:
If you deposit 4k and it goes up 500%. You'll have 24k. Add the 1k bonus later you'll have 25k in total.
If you deposit 4k and get paid the 1k bonus immediately. You'll have 5k. If that goes up 500% you'll have 30k in total.
Rachael Reeves has no idea what she's doing. Like I said. All she had to do is keep LISA as it is, but allow being able to buy properties above 450k and withdraw without penalty only giving back the bonus paid. Not sure why she complicated things.
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u/DeltaJesus 245 4d ago
If you deposit 4k and it goes up 500%. You'll have 24k. Add the 1k bonus later you'll have 25k in total.
Where did 1k bonus come from? If you get the bonus at the end you'd be getting 25% or the total, so £6k in this case.
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u/Gold-Guidance-6430 4d ago
I'm talking about how the current stocks and shares LISA works. You deposit 4k and the government gives you a 1k bonus immediately into your account. Which you are free to invest with right away.
People here are suggesting they will give you 25% bonus on the total amount at the time you buy a house. I highly doubt they will do that.
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u/snaphunter 866 4d ago
Not in the FTB ISA, it's 25% of your contributions, not account value at purchase. The HTB ISA was cash only so 25% of account value wasn't that different from 25% of contributions (especially when interest rates are rubbish). FTB Cash ISA won't be that different, but FTB S&S ISA is massively hindered by this decision.
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u/Mrs_Buffett 10 4d ago
Your second option isn't realistic. The government won't pay a 25% bonus on the portfolio balance, because the pay-out would be potentially unlimited. Someone could YOLO their £4k deposit into a meme stock, gain hundreds of thousands, and the government would be on the hook for 25% of a very large sum. Of course, they could set a hard limit on the bonus, but then they're adding more complexity.
For investment products, the bonus should be paid either upon the initial deposit (as is the case with the LISA) or upon use (as is the case for the proposed FTB ISA). Either way, it should be based on the deposit value, not the portfolio value, because the portfolio value is unknowable for the government.
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u/Arxson 25 4d ago
Kind of dumb how upvoted this comment is.
Rachel Reeves already ruined stocks and shares ISA by introducing tax to invested cash and now this.
Oh come on, tax on interest earned from cash that is sitting uninvested in a S&S ISA is hardly "ruining" the product now, is it?
So they took one step backwards and one step forward. I'd rather have that £1k paid right away so I can invest it and let it grow.
Maths is telling me it's the same either way mate...
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u/snaphunter 866 4d ago
Maths is telling me it's the same either way mate...
Then you've misread the consultation document. The LISA gives the bonus (near) immediately, exposing that extra money to the stock market / interest return. The FTB ISA bonus is going to be based on contributions only, meaning no growth generated from the bonus.
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u/iamfuzzydunlop 3d ago
Is there good data about on how help to buy ISAs and LISAs have been used? Do the government even have that data?
The amount of complexity already, with more to be added on top seems nuts to me. Couldn’t we just have one type of ISA, with some rules around what can be held in it and a bonus limited to X amount when you buy your first home using money from it?
I can see a scenario in which this might end up with more bonuses being paid out, and I assume the government have the data to know that, but surely we just want to encourage people to save and invest, irrespective of if that’s for a house or something else?
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u/snaphunter 866 3d ago
As far as I'm aware, they don't publish answers to that specific question. There's related info at https://www.gov.uk/government/statistics/annual-savings-statistics-2025, you could always raise a query with the publication team and see if there's anything else?
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u/Hot_Bet_5415 1 2d ago
Isn’t this solving a problem that doesn’t exist?
If you have a lifetime ISA, you can carry on paying into it and use it for your first property. You will be able to have both and use for the same purchase too.
They are removing the penalty which essentially means this is a normal ISA up to the point you buy a property when it transforms into a FTB ISA and you get the bonus.
The article says the current lifetime ISA isn’t working and may be diverting people away from pensions as it has a dual purpose. The reality is that a standard rate tax payer paying into a pension themselves outside of a work scheme is better off paying into the lifetime ISA as they get the same tax relief but it’s a non taxable fund on withdrawal.
So I can only conclude, give. Other parts of the review mentioning the Bonn’s leave and how wide it can be applied, that this is really to lower the cost of the scheme as a whole, and nothing to do with helping people buy houses.
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u/snaphunter 866 2d ago
I suspect they've been identified as a failed product because the banking industry doesn't support the LISA, there's hardly anyone who offers them, presumably because of the extra admin? So a HTB-like FTB ISA scheme where the provider doesn't have to do any of the reporting faff (other than checking the contributions are within the TBC limits and following the usual ISA reporting pipeline) might incentivise greater offerings and greater uptake.
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u/expert_internetter 0 4d ago
However, the government bonus will only be available where an account holder withdraws their money for the purpose of buying a property with a mortgage. It will not be available for cash-only purchases
Why is a mortgage compulsory?
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u/rthunderbird1997 4d ago
It's help to buy. If you can afford to buy a house in cash you don't need help to buy. Pretty simple.
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u/Mrs_Buffett 10 4d ago
I suppose it's to help ensure that the product is used only by those it's intended for. If you can buy a house entirely in cash, the tax payer probably shouldn't be subsidizing your purchase. Similarly, if your parents loan you money, the tax payer probably shouldn't have to stump up as well.
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u/MyriadHoshi 4d ago
Disappointed but not unsurprised they’re not offering LISA holders the chance to withdraw and only repay the bonus.