If you're saving towards your first home, you've probably come across two names that sound similar but work quite differently: the Help to Buy ISA and the Lifetime ISA (often shortened to LISA). Both offer a government bonus on top of your savings, which sounds brilliant (and it is), but the rules, limits and flexibility differ enough that mixing them up could cost you money or catch you out later.
This guide breaks down exactly how each one works, who can still open one, and what to weigh up when deciding which fits your savings goals. As with anything involving tax rules and government schemes, the details can change, so it's always worth double-checking current figures on the official government or MoneyHelper websites before making decisions.
A Quick Snapshot
Before we dig into the detail, here's the headline difference: Help to Buy ISAs are closed to new savers. If you didn't open one before the scheme closed to new applicants in November 2019, you can't get one now. Lifetime ISAs, on the other hand, are still open to new savers who meet the age criteria.
That single fact rules a lot of people out of the Help to Buy ISA conversation entirely, but if you already have one, or you're helping a partner or family member understand theirs, the rest of this guide still matters.
What Is a Help to Buy ISA?
The Help to Buy ISA was introduced to help first-time buyers save for a deposit, with the government topping up your savings by 25%.
How It Works
- You could save up to £200 a month, plus an additional lump sum in your first month (historically up to £1,200).
- The government adds a 25% bonus on top of what you've saved, but only when you come to buy your first home, not as you go along.
- To claim any bonus at all, you needed to have saved at least £1,600, and the maximum bonus available is £3,000 (based on savings of £12,000).
- The bonus is paid directly to your solicitor or conveyancer at completion, not into your bank account.
Property Price Limits
There's a cap on the value of the property you can buy using the bonus: £250,000 outside London, or £450,000 within London. These limits matter because if your dream home is above the cap, you won't be able to use the bonus towards it.
Key Dates to Know
If you already hold a Help to Buy ISA, you can keep paying into it until November 2029, and you'll need to claim your bonus by November 2030. After these deadlines, the scheme closes for good. It's worth putting a reminder in your calendar, because missing these dates could mean losing out on free government money you've already earned.
What Is a Lifetime ISA?
The Lifetime ISA is more flexible in some ways, and more restrictive in others. It was designed to help people save either for their first home or for retirement, all in one account.
Who Can Open One
You need to be between 18 and 39 years old to open a Lifetime ISA. Once opened, you can keep contributing until you turn 50, which gives it a much longer lifespan than the Help to Buy ISA ever had.
Contribution Limits and Bonus
- You can pay in up to £4,000 per tax year into a Lifetime ISA. This forms part of your overall ISA allowance (currently £20,000 across all your ISAs, so do check the current limit before planning your savings).
- The government adds a 25% bonus on whatever you pay in, added either monthly or annually depending on your provider, rather than only at the point of purchase.
- Over time, that bonus can add up to more than the Help to Buy ISA ever allowed, particularly if you're saving consistently over several years.
What You Can Use It For
A Lifetime ISA can be used in two main ways:
- Buying your first home, provided the property is worth £450,000 or less (this limit applies UK-wide, unlike the Help to Buy ISA's split London/non-London caps).
- Retirement savings, which you can access from age 60 onwards, entirely penalty-free.
The Early Withdrawal Penalty
This is where the Lifetime ISA has a sharper edge than the Help to Buy ISA. If you withdraw money for any reason other than buying your first home, reaching age 60, or in cases of terminal illness, you'll face a government withdrawal charge of 25% on the amount you take out.
That might sound like it simply removes the bonus you were given, but because the charge is calculated on the total amount withdrawn (including your own contributions), you can actually end up getting back less than you originally paid in. It's a detail that catches people out, so it's worth being genuinely confident about your plans before locking money away in a LISA.
Key Differences at a Glance
Here's a simple side-by-side to help it all sink in:
| Feature | Help to Buy ISA | Lifetime ISA | |---|---|---| | Still open to new savers? | No (closed since Nov 2019) | Yes, if aged 18-39 | | Monthly/annual limit | Up to £200/month | Up to £4,000/year | | Government bonus | 25%, paid at completion | 25%, added regularly | | Maximum bonus | £3,000 | No fixed cap, depends on contributions | | Property price cap | £250,000 (£450,000 in London) | £450,000 UK-wide | | Can be used for retirement? | No | Yes, from age 60 | | Penalty for early withdrawal | None (just don't get the bonus) | 25% charge, other than for first home, age 60, or terminal illness |
Which Might Suit Your Situation?
This isn't a one-size-fits-all decision, and it really depends on your circumstances, so it's worth thinking through carefully rather than just picking whichever sounds more generous.
If You Already Have a Help to Buy ISA
You may want to keep it running if you're on track to buy before the November 2029 deadline, particularly since there's no penalty for accessing the money outside of a house purchase, you simply won't get the bonus. Some people choose to keep contributing to their Help to Buy ISA while also opening a Lifetime ISA to boost their savings further, since you can hold both, though you can only use the bonus from one towards your house deposit.
If You're Starting From Scratch
Since Help to Buy ISAs are closed, a Lifetime ISA is really your only option if you want a government bonus towards a first home deposit, provided you're within the 18-39 age bracket. The higher annual limit and ongoing bonus payments can make a real difference over several years of saving.
If You're Thinking About Retirement Too
The dual-purpose nature of the Lifetime ISA (home deposit or retirement) makes it worth considering if you're unsure whether you'll buy a home in the near future, but do bear the early withdrawal penalty in mind. If retirement planning and pensions feel like unfamiliar territory, it's genuinely worth speaking to a free service like MoneyHelper, or a regulated financial adviser, before deciding how a Lifetime ISA fits alongside your other savings and pension contributions.
A Note on Making the Right Choice for You
Because these accounts involve tax rules, government bonuses and long-term commitments, it's not something to rush into based on a blog post alone (even a helpful one!). If you're weighing up which account, or combination of accounts, works best for your goals, consider:
- Checking the current limits and rules on GOV.UK, since figures and thresholds can change.
- Speaking to MoneyHelper for free, impartial guidance.
- Consulting a regulated financial adviser if your situation involves larger sums, mixed goals, or genuine uncertainty.
If you're still building up your savings habit before tackling ISAs altogether, our guide on budgeting basics and how to start saving effectively are good places to start, and if you want a deeper dive into ISAs generally, our ISA guide covers the full range of options available in the UK.
Bringing It All Together
Both the Help to Buy ISA and the Lifetime ISA were designed to give first-time buyers a helping hand, and both do that job well in different ways. The Help to Buy ISA is now a closed chapter for new savers but still valuable if you already hold one, while the Lifetime ISA offers more flexibility, a higher bonus potential, and the added option of retirement saving, alongside a stricter penalty if you change your mind.
Whichever route fits your circumstances, the most important step is simply getting started and staying consistent. Government bonuses are a genuine boost, but steady saving habits are what get you to your goal in the first place. Take your time, check the current rules, and don't be afraid to ask for guidance along the way, your future home (or retirement) is worth getting right.
