UK Home Deposit Savings 2026 — Lifetime ISA Rules, the 25% Bonus and the 25% Withdrawal Charge
Short answer: the account you want is the Lifetime ISA. £4,000 a year, a 25% government bonus of up to £1,000 a year, opened between 18 and 39, funded until you are 50, and the property must cost £450,000 or less. Use the money for anything else before you turn 60 and you pay a 25% withdrawal charge on the whole pot — which takes back more than the bonus gave you.
Correction notice (updated 30 July 2026). There is no UK "First Home Savings Account" (FHSA). Earlier versions of this page described one in detail — a £4,000 annual limit, £800 to £1,600 a year of income tax relief, unused allowance carried forward, a £425,000 property ceiling — and built savings timelines and "LISA + FHSA" combination strategies on top of it. None of that exists in the United Kingdom. The FHSA is a Canadian product. Every FHSA figure, table row, timeline and strategy has been deleted rather than annotated, because a warning at the top does not help a reader who skims straight to the sections below it.
If you have spent months looking for one: you have not missed a deadline, and no bank turned you away in error. The account was never available to open here. Two of the details were not merely misattributed but impossible under UK rules. ISA allowances cannot be carried forward — HMRC's guidance for ISA managers states plainly that an investor who has not subscribed up to the limit in any year cannot add the difference to the next year's limit. And no ISA gives income tax relief on contributions; the Lifetime ISA pays a cash bonus instead, which is worth exactly as much to a basic-rate taxpayer as to a higher-rate one.
Also corrected: the withdrawal charge, previously given here as "20%, plus clawback of the bonus". It is a single 25% charge, and the arithmetic below shows why that is worse than it sounds.
What actually exists, as of 30 July 2026
| Route | Status | Who it is for |
|---|---|---|
| Lifetime ISA | Open | First-time buyers aged 18–39, buying at £450,000 or less |
| Cash ISA / Stocks & Shares ISA | Open | Anyone; no bonus, but no restriction on what you spend it on |
| Help to Buy ISA | Closed to new accounts on 30 November 2019; existing accounts still run | People who opened one before that date |
| Help to Buy: Equity Loan (England) | Closed — you can no longer apply | Existing borrowers managing a loan |
| Help to Buy – Wales equity loan | Open | First-time buyers of new-build homes in Wales |
| Mortgage Guarantee Scheme (2025) | Open — a permanent scheme, available since July 2025 | Buyers with a 5% deposit, UK-wide |
| First Homes (England) | Open | First-time buyers, at a discount to market price |
| Shared ownership | Open, UK-wide | Buyers who cannot fund a whole purchase |
The Lifetime ISA: the rules that decide whether it fits
- £4,000 a year, and that sits inside your overall £20,000 ISA allowance for 2026/27. It is not extra room on top.
- 25% government bonus on what you pay in, capped at £1,000 a year.
- You must be 18 or over and under 40 to open one. You can keep paying in and earning the bonus until you turn 50; after that the account stays open and keeps earning interest or investment returns, but no more contributions and no more bonus.
- You must be resident in the UK, or a Crown servant or member of the armed forces (or their spouse or civil partner) serving overseas.
- You can pay into only one Lifetime ISA in a tax year.
- It can hold cash, stocks and shares, or a mixture.
To use it for a first home, every one of these must hold:
- the property costs £450,000 or less
- you buy at least 12 months after your first payment into the account
- you are buying with a mortgage
- you will live in the property
- a conveyancer or solicitor acts for you — the provider pays the money to them, never to you
- the amount withdrawn is no more than the purchase price
It will not work if the mortgage is a private loan from a relative, from your spouse or civil partner, or from a relative of theirs.
Buying with someone who also holds a Lifetime ISA: you can both use your savings and both bonuses, provided you are both first-time buyers and both meet the conditions above.
The 25% withdrawal charge, worked out
This is the most misunderstood feature of the product, and the error always runs the same way: people assume the charge simply hands the bonus back. It does not.
The bonus is 25% of what you pay in. The charge is 25% of what comes out — and what comes out includes the bonus, and any growth on it.
gov.uk's own example: pay in £800, receive a £200 bonus, and you hold £1,000. Withdraw the lot for anything other than a first home, age 60 or over, or terminal illness, and the charge is 25% of £1,000, which is £250. You are handed £750.
You paid in £800. You get back £750. You are £50 down — 6.25% of your own money gone, on top of losing every penny of the bonus.
That 6.25% is not an artefact of the example. It holds at any amount:
- the bonus adds 25%, so the pot is 1.25 times your contributions
- the charge takes 25% of that larger pot, which is 31.25% of your contributions
- what reaches you is 93.75% of what you paid in
An unqualified withdrawal returns 93.75 pence in the pound, whatever the pound was.
At full contributions over five years, ignoring growth:
| Amount | |
|---|---|
| You pay in (£4,000 a year for 5 years) | £20,000 |
| Government bonus at 25% | £5,000 |
| Pot before any growth | £25,000 |
| Withdrawal charge, 25% of £25,000 | £6,250 |
| You receive | £18,750 |
| Against what you paid in | −£1,250 |
Partial withdrawals are worse than they look, because the charge comes off what you request, not off what you receive. gov.uk's example: to end up with £120 in your hand you must withdraw £160 and pay a £40 charge. The multiplier is four-thirds — to receive £9,000 you would have to take £12,000 out and hand over £3,000.
Three things are not charged: withdrawing at 60 or over, terminal illness with less than 12 months to live, and death, which closes the account with no charge. Transferring a Lifetime ISA into another type of ISA before 60 is charged — including a transfer back into a Help to Buy ISA.
One more trap catches buyers mid-purchase. Once funds are released to your conveyancer, the purchase must complete within 90 days (extendable by 60 days, then a further 30). If it falls through, the full amount must be returned to the ISA provider. Any shortfall is treated as a withdrawal and charged at 25%.
The £450,000 cap, and where it already bites
The cap is £450,000 across the whole of the UK. It is not regional, and it does not rise with prices.
Here is what first-time buyers actually paid, from HM Land Registry's UK House Price Index for March 2026, with the deposit each price implies:
| Region (England) | Average first-time buyer price, March 2026 | 10% deposit | 15% deposit | 20% deposit |
|---|---|---|---|---|
| North East | £141,462 | £14,146 | £21,219 | £28,292 |
| Yorkshire and The Humber | £180,177 | £18,018 | £27,027 | £36,035 |
| North West | £186,431 | £18,643 | £27,965 | £37,286 |
| East Midlands | £206,627 | £20,663 | £30,994 | £41,325 |
| West Midlands | £208,555 | £20,856 | £31,283 | £41,711 |
| South West | £248,495 | £24,850 | £37,274 | £49,699 |
| East of England | £277,803 | £27,780 | £41,670 | £55,561 |
| South East | £298,804 | £29,880 | £44,821 | £59,761 |
| London | £463,239 | £46,324 | £69,486 | £92,648 |
| England as a whole | £242,928 | £24,293 | £36,439 | £48,586 |
Read the London row again. £463,239 is above the cap. The average first-time purchase in London no longer qualifies for a Lifetime ISA at all.
That does not make the account useless in the capital — plenty of flats sell below £450,000, and Barking and Dagenham, the cheapest London borough, averaged £361,000 across all property types in March 2026. But it changes two decisions:
- If there is a realistic chance you buy above £450,000, keep the deposit out of a Lifetime ISA. Going over the cap does not merely forfeit the bonus. It makes the withdrawal unauthorised, so the 25% charge applies and you walk away with 93.75% of your own contributions.
- In the South East and the East of England, you have less headroom than the regional average suggests. A buyer paying the South East average of £298,804 is comfortably inside the cap. The same buyer choosing a house rather than a flat, or a better commuter town, can cross £450,000 without feeling extravagant.
Two deadlines that make this time-sensitive
The age-39 cut-off. You must open a Lifetime ISA before your 40th birthday. Not fund it fully, not decide about it — open it. Once it exists you can pay in until you are 50, so an account opened at 39 still has roughly a decade of £1,000 bonuses ahead of it. An account not opened by 40 has none, ever, at any price. If you are 38 or 39 and might buy a first home in the next ten years, opening one with whatever minimum your provider accepts is the cheapest option you will ever hold: it costs almost nothing and it preserves the right to use the account later.
The 12-month rule. You cannot put the money towards a purchase until 12 months after your first payment into the account. The clock starts on that first payment, not on the day you started saving elsewhere. Open one today and the earliest you can use it is 30 July 2027. This is the commonest reason a Lifetime ISA turns out to be unusable at exactly the moment it is needed — and the second reason to open one early, even with a token amount.
Lifetime ISA, Cash ISA or Stocks & Shares ISA
| Lifetime ISA | Cash ISA | Stocks & Shares ISA | |
|---|---|---|---|
| Annual limit | £4,000 | Up to £20,000 | Up to £20,000 |
| Sits inside the £20,000 allowance | Yes | Yes | Yes |
| Government bonus | 25%, up to £1,000 a year | None | None |
| Tax on interest, income or gains | None | None | None |
| Age to open | 18 to 39 | 18 or over | 18 or over |
| Property price ceiling | £450,000 | None | None |
| Access before 60 | First home only, otherwise a 25% charge | Any time | Any time |
| Sensible for a purchase inside 12 months | No | Yes | Rarely — a short horizon and market risk sit badly together |
How to choose:
- First-time buyer, under 40, buying below £450,000, more than a year away. Lifetime ISA first, up to £4,000 a year. A guaranteed 25% on new money is not available anywhere else in the UK.
- Buying above £450,000, or genuinely unsure. Cash ISA. You give up the bonus and keep full control of the money.
- Buying in the next year or two. Cash ISA — partly because of the 12-month rule, and partly because money needed on a fixed completion date should not be exposed to markets.
- Five years or more away, and comfortable with risk. A Lifetime ISA can hold stocks and shares, so you do not have to choose between the bonus and market exposure. But move it to cash before you start making offers.
- You own, or have ever owned, a home. You are not a first-time buyer and the property route is closed to you. A Lifetime ISA still works as a retirement pot from 60, but that is a different question from this one.
You can split the £20,000 allowance across accounts, and since April 2024 you may pay into more than one cash ISA in the same tax year. The Lifetime ISA is the exception: one only, per tax year.
If you already hold a Help to Buy ISA
It closed to new accounts on 30 November 2019, but existing accounts are still running and still worth money:
- pay in up to £200 a month, until 30 November 2029
- 25% government bonus, up to £3,000 — every £200 saved earns £50
- the bonus must be claimed by 1 December 2030
- the property must cost up to £250,000, or £450,000 in London
- it must be the only home you own, and where you intend to live
- to release the bonus, the funds must be withdrawn and the account closed; your conveyancer applies for it, and you never repay it
Three interactions worth knowing:
- Hold both a Help to Buy ISA and a Lifetime ISA and you may use the government bonus from one of them only.
- You can transfer a Help to Buy ISA into a Lifetime ISA. Transferring the other way triggers the 25% withdrawal charge.
- If the purchase falls through after you closed the account, you can make a single reinstatement subscription, up to the amount withdrawn, within 12 months of the closure or final withdrawal date, using the purchase failure notice from your conveyancer.
What the government still offers beyond ISAs
Help to Buy: Equity Loan (England) — closed. gov.uk states you can no longer apply. If you already hold one: no interest for the first five years, then 1.75% of the amount you originally borrowed in year six, rising each April by CPI plus 2% (2021–23 scheme) or RPI plus 1% (2013–2021 scheme), plus a £1 monthly management fee. You repay a percentage of the property's market value rather than the cash you borrowed, and the whole loan falls due when you sell, clear the repayment mortgage, or reach the end of the term — normally 25 years. The smallest part-repayment is 10% of market value.
Help to Buy – Wales — open. An equity loan towards a new-build home for first-time buyers in Wales, run by the Welsh Government.
Mortgage Guarantee Scheme — open. A permanent scheme, available since July 2025 and UK-wide, which backs participating lenders on 91–95% loan-to-value mortgages so that 5% deposits stay obtainable. It is a guarantee to the lender, not money to you: it does not cut your deposit or your rate, it makes the product more likely to be on the shelf at all. First-time buyers and home movers both qualify.
First Homes (England), shared ownership (UK-wide) and Rent to Buy (England) all remain open. There is no successor to the Help to Buy equity loan in England, and gov.uk's list of affordable home ownership schemes does not offer one. Any page describing an English equity loan as currently available is out of date.
How long a deposit really takes
At the maximum, £5,000 lands in the account each year — your £4,000 plus £1,000 of bonus. Contributions and bonus only, no growth assumed, so every figure below is checkable:
| Target | Lifetime ISA at £4,000 a year | Same £4,000 a year, no bonus | Two buyers, one Lifetime ISA each |
|---|---|---|---|
| £20,000 | 4 years | 5 years | 2 years |
| £30,000 | 6 years | 7.5 years | 3 years |
| £40,000 | 8 years | 10 years | 4 years |
| £50,000 | 10 years | 12.5 years | 5 years |
The bonus buys back a fifth of the time — 8 years to £40,000 instead of 10, on the same contributions. That is the whole benefit, and it is real. It is not the three-year timelines this page used to print, which depended entirely on a second account that does not exist.
Two caveats. Interest and investment returns will pull every row in, and any year you cannot find £4,000 will push it out — the missed allowance does not roll over to next April. And having the deposit is not the same thing as being able to borrow: lenders size the loan on income, which is why the mortgage guarantee scheme exists at the small-deposit end of the market at all.
Five mistakes that cost real money
- Treating the withdrawal charge as a clawback of the bonus. It is 25% of everything you take out, so you finish below what you paid in. Work the 93.75% out before you decide a Lifetime ISA can double as an emergency fund. It cannot.
- Waiting until you are 40 to open one. Opening is the deadline. Funding is not.
- Opening the account and starting the house-hunt in the same month. The 12-month clock runs from your first payment, and nothing shortens it.
- Putting the whole deposit into a Lifetime ISA when the target price is near £450,000. Asking prices move. The cap does not.
- Assuming an unused allowance rolls over. It does not, for any ISA. An April you skip is gone.
Sources
Every figure on this page was verified against gov.uk on 30 July 2026:
- Lifetime ISA — overview, who can open one, and withdrawing money (gov.uk/lifetime-isa)
- Conveyancers: first time residential purchase with a Lifetime ISA — HMRC (the 90-day completion window and the conditions for a charge-free withdrawal)
- Individual Savings Accounts (ISAs): how ISAs work — the £20,000 allowance for 2026/27 and the one-Lifetime-ISA-per-year rule
- How to manage ISA subscriptions — HMRC guidance for ISA managers (no carry-forward of unused allowance; Help to Buy ISA scheme rules and reinstatement)
- Help to Buy ISA (gov.uk/help-to-buy-isa) — monthly limit, bonus, price caps
- Help to Buy: ISA Scheme Quarterly Statistics, HM Treasury, 27 November 2024 — the 30 November 2019 closure date, the 30 November 2029 contribution deadline and the 1 December 2030 bonus deadline
- Help to Buy: Equity Loan and Affordable home ownership schemes — gov.uk
- 2025 Mortgage Guarantee Scheme, HM Treasury, 15 July 2025
- UK House Price Index for March 2026, HM Land Registry, published 20 May 2026 — average first-time buyer price by region