ISA Guide: Lifetime ISA vs Help to Buy ISA — Which Is Better for Your First Home?

The Help to Buy ISA was launched in December 2015 as the government's flagship scheme to help first-time buyers save for a deposit. It closed to new applicants on 30 November 2019, but existing account holders can continue saving into their accounts until 30 November 2029. The government bonus must be claimed by 1 December 2030.

Contributions are capped at £200 per month, with a one-off initial deposit of up to £1,000 allowed when the account is first opened. Over time, the maximum you can save (excluding interest) is therefore £1,000 plus £200 per month. The 25% government bonus is payable on savings between £1,600 and £12,000, meaning the maximum bonus is £3,000 on the full £12,000 of eligible savings.

One critical detail catches many buyers off guard: the Help to Buy ISA bonus is paid at the point of property completion, not at exchange of contracts. This means you cannot use the bonus as part of your exchange deposit. Your solicitor claims the bonus from HMRC after completion, which can create a shortfall if you are relying on it for your upfront deposit. The property must cost no more than £250,000 (or £450,000 in London) to qualify for the bonus.

The Lifetime ISA was introduced in April 2017 and remains open to new applicants. You can open one if you are aged 18 to 39, and you can continue paying in until your 50th birthday. The annual contribution limit is £4,000, and the government adds a 25% bonus of up to £1,000 per year — paid monthly into your account, rather than claimed at completion.

This monthly bonus payment is a significant advantage over the Help to Buy ISA. Because the LISA bonus is credited to your account as you save, it can earn interest or investment returns alongside your own contributions. If you hold a stocks and shares LISA, the bonus is invested immediately, giving it time to grow.

The LISA can be used to buy a first home worth up to £450,000 anywhere in the UK — there is no lower regional cap as with the Help to Buy ISA. Alternatively, you can withdraw the funds penalty-free after age 60 for retirement. However, if you withdraw for any other reason, you face a 25% withdrawal charge on the full amount taken out. Because the charge applies to both your contributions and the bonus, this effectively means you lose 6.25% of your original contribution — a genuine penalty, not simply the return of the bonus.

The LISA's £4,000 annual limit counts towards your overall £20,000 ISA allowance. For those who also hold a cash ISA or stocks and shares ISA, this is an important consideration — particularly as the tax year deadline approaches. For more on maximising your ISA allowance, see our ISA deadline guide.

The clearest way to compare the two schemes is side by side. The table below summarises the key differences that matter for first-time buyers.

Contribution limits: The LISA allows £4,000 per year versus the Help to Buy ISA's effective maximum of £3,400 in year one (£1,000 initial plus £200 x 12) and £2,400 per year thereafter. Over five years, you could save £20,000 in a LISA versus approximately £12,600 in a Help to Buy ISA.

Government bonus: Both offer 25%, but the LISA bonus is paid monthly while the Help to Buy bonus is claimed at completion. The LISA's maximum annual bonus of £1,000 significantly exceeds the Help to Buy ISA's maximum of £600 per year (or £800 in year one including the bonus on the initial deposit).

Property price cap: The LISA permits purchases up to £450,000 nationwide. The Help to Buy ISA is limited to £250,000 outside London (£450,000 within London), which in today's housing market excludes a substantial number of properties in southern England.

Withdrawal flexibility: Help to Buy ISA funds can be withdrawn at any time without penalty (though you lose the bonus entitlement on withdrawn amounts). LISA withdrawals for non-qualifying purposes incur the 25% charge.

Yes — you can hold both a Lifetime ISA and a Help to Buy ISA simultaneously. However, there is an important restriction: you can only use the government bonus from one scheme towards your property purchase. You cannot claim both the LISA bonus and the Help to Buy ISA bonus on the same home.

This means holding both accounts can still be useful as a savings strategy, but you will need to choose which bonus to claim when you buy. In almost all cases, the LISA bonus will be larger if you have been contributing the maximum, making it the obvious choice for the bonus claim. You could then withdraw your Help to Buy ISA savings (without claiming the bonus) and use them as additional deposit funds.

If you currently hold a Help to Buy ISA and are considering opening a LISA, you can transfer your Help to Buy ISA balance into the LISA. However, the transferred amount counts towards your £4,000 annual LISA contribution limit. If your Help to Buy ISA balance exceeds £4,000, you would need to transfer it across multiple tax years. For more on ISA rules and strategies, visit our ISA hub.

It is worth noting that the Help to Buy ISA sits within the cash ISA wrapper, so if you also hold a separate cash ISA, you need to ensure you are not inadvertently exceeding contribution rules. The LISA is a distinct ISA type, separate from cash and stocks and shares ISAs, though all count towards your £20,000 annual allowance.

The LISA's 25% withdrawal charge is frequently misunderstood. Many assume it simply claws back the 25% government bonus, leaving you where you started. In fact, the charge is levied on the total withdrawal amount — your contributions plus the bonus — which means you lose more than just the bonus.

Here is a worked example: you contribute £4,000 and receive a £1,000 bonus, giving you £5,000 in total. If you make a non-qualifying withdrawal, the 25% charge is applied to the full £5,000, costing you £1,250. You receive £3,750 — meaning you have lost £250 of your own money on top of forfeiting the bonus. That represents a 6.25% loss on your original contribution.

This penalty was temporarily reduced to 20% during the COVID-19 pandemic (from 6 March 2020 to 5 April 2021) to allow savers to access their funds without the additional loss. However, the 25% rate has been reinstated and there are no current plans to change it.

The penalty underscores the importance of being reasonably certain about your plans before committing to a LISA. If you are unsure whether you will buy a property within the price cap, or if you might need the money for other purposes before age 60, the Help to Buy ISA's penalty-free withdrawals offer more flexibility — though of course the Help to Buy ISA is no longer open to new savers.

With the Bank of England base rate at 3.75% as of March 2026, cash ISA rates remain relatively attractive. Help to Buy ISA rates vary by provider but typically track below the best cash ISA rates. The LISA offers a choice: hold it in cash or invest in stocks and shares.

For a cash LISA, the monthly bonus means your government top-up starts earning interest immediately. Over a five-year saving period, this compounding effect adds meaningful value compared to the Help to Buy ISA, where the bonus is only paid at completion and earns nothing in the interim.

A stocks and shares LISA carries investment risk but offers the potential for higher long-term returns. If you are saving for a property purchase within the next two to three years, a cash LISA is generally more appropriate — you do not want market volatility to reduce your deposit just as you are ready to buy. For a longer time horizon, or if you are also using the LISA as a retirement savings vehicle, a stocks and shares LISA may be worth considering. Our guide to stocks and shares ISAs vs cash ISAs explores this trade-off in more detail.

For those approaching the end of the tax year, remember that unused ISA allowance cannot be carried forward. The Spring Statement 2026 confirmed no changes to the £20,000 annual limit for 2026/27, so planning your contributions before 5 April remains essential.

Your decision depends on your circumstances, timeline, and risk tolerance. Here is a straightforward framework.

Keep your Help to Buy ISA if: you already have a substantial balance built up, you plan to buy a property under £250,000 (or £450,000 in London) within the next year or two, and you value the ability to withdraw funds without penalty. The Help to Buy ISA is simpler and lower-risk, particularly if your target property falls within its price cap.

Open a LISA (or transfer) if: you want to maximise your government bonus, your target property is priced between £250,000 and £450,000 outside London, you have a longer saving timeline, or you want the option of using the funds for retirement if you do not end up buying. The LISA's higher contribution limit and monthly bonus payment make it the stronger wealth-building tool.

Hold both if: you want maximum flexibility and can afford to save into both. Use the LISA for the bonus and the Help to Buy ISA as a penalty-free savings buffer. Just remember you can only claim one bonus per purchase.

For guidance on choosing between savings products more broadly, including how ISAs interact with your wider financial plan, the MoneyHelper service offers free, impartial advice regulated by the FCA.

Several important deadlines govern both schemes, and missing them could cost you thousands in lost bonus entitlement.

The Help to Buy ISA closes to all contributions on 30 November 2029. After that date, you will no longer be able to pay money into your account, though the balance will remain accessible. The government bonus must be claimed by 1 December 2030 — if you have not completed on a property purchase by then, your bonus entitlement expires permanently.

For the LISA, you must open your account before your 40th birthday, but you can continue contributing until you turn 50. There is no overall scheme closure date. The annual contribution window aligns with the tax year, running from 6 April to 5 April. Any unused LISA allowance cannot be carried over.

If you are transferring from a Help to Buy ISA to a LISA, initiate the transfer well before these deadlines. Transfers can take several weeks, and any amount transferred counts towards your £4,000 LISA limit for the current tax year. Plan to transfer over multiple tax years if your Help to Buy ISA balance is large.

Important: This article is for informational purposes only and does not constitute financial advice. ISA rules and government bonus schemes may change. For personalised guidance, consult a regulated financial adviser. Past performance and current rates are not guaranteed. Capital is at risk with stocks and shares ISAs. The Financial Conduct Authority (FCA) regulates ISA providers but does not guarantee returns.