Confirmed during today’s Autumn Budget, the new product will allow savers to contribute up to £4,000 a year, matching the current LISA limit, and will offer a 25% government bonus.
However, the government rejected calls to increase, index-link, regionalise or remove the £450,000 property value cap.
It said the threshold remains an important mechanism for targeting support at typical first-time buyers while maintaining the fiscal sustainability of the scheme.
However, as a concession to buyers facing higher house prices, the government said that from 29 October 2026, Lifetime ISA holders purchasing properties above the £450,000 threshold could withdraw their funds with a reduced withdrawal charge of 20%. This means that savers will only lose their government bonus rather than any of their savings.
Sarah Coles, head of personal finance at AJ Bell, said “This is a step forward for people otherwise being priced out of the scheme through no fault of their own, who were being clobbered with a harsh penalty.”
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Furthermore, unlike previous schemes, the bonus amount will be calculated on the account’s final balance when the funds are withdrawn to purchase a qualifying property. The government says this avoids the need for a withdrawal charge.
While savers miss out on the compounding interest of former annual bonuses, their final bonus will be based on total interest and savings over the lifetime of the account.
The government said this approach reflects feedback from its consultation, which called for bonuses to be calculated more simply.
