Lifetime ISA set to be scrapped - everything you need to ...

Money

Lifetime ISA set to be scrapped - everything you need to know

Over a million people hold an account

Albert TothThursday 27 November 2025 16:24 GMTComments

CloseMartin Lewis issues November warning to claim back hundreds of pounds Independent money

Sign up to our free money newsletter for investment analysis and expert advice to help you build wealth

Sign up to our free money email for help building your wealth

Email*SIGN UP

I would like to be emailed about offers, events and updates from The Independent. Read our Privacy notice

The government is set to reform the Lifetime ISA (Lisa), it was confirmed at Wednesday’s Budget, meaning major changes for millions of savers.

Held by an estimated 1.3 million people, the government-backed savings account offers a unique ‘savings rate’ of 25 per cent, but can only be used to purchase a first home. It was first introduced in 2017.

Up to £4,000 a year can be deposited into a Lisa, to which the government will add a maximum of £1,000, equalling up to £5,000. The savings accumulated cannot be used to purchase a property worth more than £450,000.

The Treasury says: “The government will publish a consultation in early 2026 on the implementation of a new, simpler ISA product to support first time buyers to buy a home. Once available, this new product will be offered in place of the Lifetime ISA.”

Money expert Martin Lewis has campaigned for changes to the Lifetime Isa for several years (Martin Lewis Money Show/ITV)

The scope of this review has not been laid out, but it will likely aim to address issues raised by campaigners in recent years.

This spend limit has been a key criticism of the scheme, as house prices – particularly in the capital – quickly outpace the £450,000 mark.

Removing money from a Lisa for any other reason will also result in a 25 per cent deduction, which money expert Martin Lewis has pointed out in the past equates to a 6.25 net reduction in funds.

The Money Saving Expert Founder has previously predicted that the scheme could be tweaked in one of two ways. This would be by removing that effective fine for buying a bigger property, or increasing the threshold to “somewhere in the £500,000s” as it would be if the amount had risen with inflation.

Reacting to the Budget, he said: “When I chatted to a very senior member of the government about this, what I was told was they will be looking at ... they will be looking within that consultation also at whether they should be increasing that £450,000 threshold on the Lifetime ISA”.

Get a free fractional share worth up to £100.Capital at risk.

Terms and conditions apply.

Go to website

Get a free fractional share worth up to £100.Capital at risk.

Terms and conditions apply.

Go to website

Dan Coatsworth, head of markets at AJ Bell, said: “It looks like the Government is ready to hammer a nail into the Lifetime Isa’s coffin.”

He added: “The Isa system in general is too complicated, and the Lifetime Isa is one of the worst offenders, featuring withdrawal penalties for certain circumstances and a cap on property purchase limits that hasn’t kept pace with the broader property market.”

Alongside the announcement, chancellor Rachel Reeves confirmed that the Cash Isa limit will drop from £20,000 to £12,000, with a notable exception for those aged over 65. It’s thought this was done in a bid to increase interest in investing.