Help to Buy ISA vs Lifetime ISA: Which Is Right for You?
Both the Help to Buy ISA and Lifetime ISA offer a 25% government bonus to help you buy your first home. But they have very different rules, and choosing the wrong one could mean missing out on thousands of pounds.
Quick answer
The Help to Buy ISA is closed to new accounts (since November 2019). If you don't already have one, you need a Lifetime ISA: it has a higher allowance, bigger potential bonus, and a higher property price limit. The only reason to use a Help to Buy ISA is if you already have one open.
Help to Buy ISA: what you need to know
The Help to Buy ISA launched in December 2015 and was aimed at first-time buyers saving for a deposit. The government added a 25% bonus when you used the savings to buy a home. It closed to new applicants on 30 November 2019.
If you already hold a Help to Buy ISA, you can continue saving into it until 30 November 2029, and you must claim the bonus by 1 December 2030. After that, the scheme ends entirely.
Lifetime ISA: what you need to know
The Lifetime ISA (LISA) launched in April 2017. It's open to anyone aged 18–39 and can be used for either a first home purchase or retirement from age 60. You can continue contributing until age 50.
The 25% government bonus is paid monthly by HMRC, so you don't have to wait until completion to see the money. The catch is a 25% withdrawal penalty if you take money out for any other reason (which effectively means you lose 6.25% of your own savings, not just the bonus).
Side-by-side comparison
| Feature | Help to Buy ISA | Lifetime ISA |
|---|---|---|
| Available now? | Existing holders only | Yes (age 18–39) |
| Max annual contribution | £2,400 | £4,000 |
| Max annual bonus | £600 | £1,000 |
| Max total bonus | £3,000 | £33,000+ |
| Property limit | £250k (£450k London) | £450,000 |
| Retirement use | No | Yes (from age 60) |
| Withdrawal penalty | None (bonus forfeited) | 25% on total |
Which should you choose?
I already have a Help to Buy ISA
Keep saving into it until November 2029. If you're also under 40 and haven't opened a Lifetime ISA, consider doing so. You can hold both, though you can only use the government bonus from one toward a first home purchase. The LISA's higher limit often makes it worth running alongside a HTB ISA.
I'm 18–39 and don't have a Help to Buy ISA
Open a Lifetime ISA. The Help to Buy ISA isn't available to new savers. The LISA gives you a higher allowance (£4,000 vs £2,400/year), a higher property limit (£450,000 everywhere, not just London), and the option to use it for retirement if your plans change.
My property might cost more than £250,000 (outside London)
If you have a Help to Buy ISA and you're buying outside London for more than £250,000, the HTB ISA bonus will be forfeited. A LISA allows properties up to £450,000 anywhere in the UK, making it more useful for anyone buying at a higher price point.
Watch out: the LISA withdrawal penalty
The 25% penalty on non-qualifying withdrawals is steep. If you withdraw £10,000 (including a £2,000 bonus), you pay £2,500 back, meaning you get £7,500 of your own £8,000 deposit. Only put money in a LISA that you're genuinely committed to using for a first home or retirement.
Can I transfer a Help to Buy ISA into a Lifetime ISA?
Yes — and for most people with a Help to Buy ISA it's worth seriously considering. You can transfer your HTB ISA savings into a Lifetime ISA as a cash contribution, subject to the LISA's annual limit of £4,000.
Important: the transfer counts towards your LISA limit
Whatever you transfer counts as a new LISA contribution in the tax year you transfer it. If your HTB ISA holds £8,000, you can only transfer £4,000 this year and £4,000 next year. Each transferred £4,000 earns £1,000 of LISA bonus.
You must be under 40 to open a Lifetime ISA, but if you already have one you can transfer into it at any age up to 50. The transfer process typically involves instructing your LISA provider directly — they'll contact your HTB ISA provider to arrange the transfer. You cannot transfer between providers yourself without losing the HTB ISA's tax-free status.
Once transferred, the money sits in the LISA earning the 25% monthly bonus. The Help to Buy ISA is closed, and you cannot reopen it or contribute to another one. Your HTB ISA bonus (up to £3,000) is forfeited on any savings transferred out, but this is more than offset by the LISA's higher lifetime bonus potential.
Buying with a partner
If you're buying jointly, each of you can use your own government bonus scheme savings — but only if both of you are first-time buyers. The rules differ by scheme:
Two Lifetime ISA holders
Both partners can use their LISA savings and government bonuses toward the same purchase. Between you, you could contribute up to £8,000 per year (£4,000 each), earning £2,000 in combined annual bonuses. The £450,000 property price limit applies to the property, not per person.
One LISA, one Help to Buy ISA
You can only use the government bonus from one scheme toward a single property purchase per person. If one partner uses their LISA bonus and the other uses their HTB ISA bonus, both are valid — but you cannot use both the LISA and HTB ISA bonus from the same person on the same purchase.
One partner is not a first-time buyer?
If one of you has previously owned a property, neither of you can claim first-time buyer stamp duty relief — but you can still use your LISA for the purchase (the LISA has its own first-time buyer definition that is independent of SDLT). The partner who has never owned can still use their LISA or HTB ISA bonus.
Common questions
Can I use a LISA for a property worth more than £450,000?
No. If you use a LISA to buy a property priced above £450,000, the withdrawal is treated as non-qualifying and you'll pay the 25% penalty. Your own money, contributions, and bonus are all subject to that penalty — so effectively you lose 6.25% of your own savings. If you're buying above £450,000, the LISA is better left for retirement (accessible from age 60) or simply not withdrawn.
When does the LISA bonus get paid?
HMRC pays the 25% bonus directly into your LISA, roughly 6–8 weeks after the end of the month in which you contribute. You don't have to do anything — your LISA provider claims it automatically. This means money you put in on 31 March might not receive its bonus until late May, so factor that into your completion timeline.
What happens at completion — who handles the bonus?
Your solicitor or conveyancer manages this for you. They'll request a withdrawal from your LISA provider (or claim the HTB ISA bonus from your bank) once exchange has happened and you have a completion date. For a LISA, the funds are transferred directly to your solicitor's client account; they apply to HMRC to withdraw the funds. Allow at least 30 days between requesting the LISA withdrawal and your completion date.
Does a LISA affect my universal credit or benefits?
The savings held in a LISA count as capital for means-tested benefits like Universal Credit. If your total savings (across all accounts) exceed £6,000, your Universal Credit will be reduced; above £16,000 you're ineligible entirely. The government bonus is included in your LISA balance, so it counts too.