Help to Buy & LISA Explained
Government schemes for first-time buyers
Getting on the property ladder in the UK is harder than ever. The average house price is over 8 times the average salary. The government has introduced several schemes to help first-time buyers, but they can be confusing. Here is a clear breakdown of what is available and which one suits you.
Lifetime ISA (LISA)
The Lifetime ISA is the main scheme available for first-time buyers. You must be aged 18 to 39 to open one. You can save up to £4,000 per year and the government adds a 25% bonus, meaning up to £1,000 free per year. The money can be used to buy your first home (up to £450,000) or withdrawn after age 60 for retirement.
If you withdraw for any other reason, you pay a 25% penalty on the whole amount, which means you actually lose some of your own money. The LISA must be open for at least 12 months before you can use it to buy a property, so open one as early as possible even if you only put in £1.
You can hold a Cash LISA or a Stocks and Shares LISA. If you are buying within 2-3 years, cash is safer. If your timeline is 5+ years, investing gives better expected returns despite the volatility.
Help to Buy: ISA (Closed)
The Help to Buy ISA closed to new applicants in November 2019. If you already have one, you can keep saving into it until November 2029 and claim the bonus until November 2030. The government adds 25% on savings between £1,600 and £12,000, giving a maximum bonus of £3,000.
Unlike the LISA, the bonus is paid at completion rather than monthly, which can cause problems if you need the bonus for your deposit at exchange. Many conveyancers have found workarounds, but it is worth checking with your solicitor early.
Scheme Comparison
| Feature | Lifetime ISA | Help to Buy ISA |
|---|---|---|
| Status | Open | Closed to new applicants |
| Annual limit | £4,000 | £2,400 |
| Max bonus | £1,000/year | £3,000 total |
| Property limit | £450,000 | £250k (£450k London) |
| Bonus paid | Monthly | At completion |
| Withdrawal penalty | 25% | None (lose bonus) |
First Homes Scheme
The First Homes scheme offers newly built homes at 30-50% below market value to first-time buyers and key workers. The discount stays with the property forever. You must be a first-time buyer, earn under £80,000 (£90,000 in London), and the discounted price must be under £250,000 (£420,000 in London).
Which Should You Choose?
If you are under 40 and saving for a first home, open a Lifetime ISA immediately. Maximise the £4,000 annual contribution if you can. If you already have a Help to Buy ISA, you can transfer it to a LISA, but check the maths first as you might lose the Help to Buy bonus. You can hold both, but you can only use the bonus from one for a property purchase.