Every first-time buyer asks the same question once they hear the words “25% government bonus”: Help to Buy ISA or Lifetime ISA? The answer changed three times between 2017 and 2024, and the rules in 2026 are not the same as the ones you will read in older guides. Here is what actually matters now.
The headline difference
Both schemes pay a 25% government bonus on your savings. That is where the similarity ends.
- Help to Buy ISA: closed to new applicants since 30 November 2019. Existing accounts can keep paying in £200 a month until November 2029. Bonus is paid by your solicitor on completion of a property worth up to £250,000 (£450,000 in London).
- Lifetime ISA: open to anyone aged 18 to 39. You can pay in up to £4,000 a year, getting a 25% bonus (£1,000 max per year) paid monthly. Property must cost £450,000 or less anywhere in the UK. You must hold the account for 12 months before using it for a first home.
Worked example: how much bonus you actually get
Assume you save the maximum into each for 4 years and use it for a £300,000 home outside London.
| Scheme | Annual cap | 4-year savings | 25% bonus |
|---|---|---|---|
| Help to Buy ISA | £2,400 | £9,600 | £2,400 |
| Lifetime ISA | £4,000 | £16,000 | £4,000 |
The Lifetime ISA gives you £1,600 more bonus over the same period, plus the savings themselves can be invested rather than sitting in cash.
The London price cap problem
The Lifetime ISA caps property value at £450,000 anywhere in the UK. The Help to Buy ISA cap in London is also £450,000, but outside London it is £250,000.
In 2026 the average flat in zones 3 to 6 London sits between £380,000 and £520,000. For roughly 40% of London first-time buyers, the property they actually want costs more than £450,000, and they lose the bonus entirely.
Treasury has reviewed the cap multiple times. As of May 2026 it has not moved. Plan around the actual cap, not the cap you wish existed.
The 12-month minimum and the withdrawal penalty
The Lifetime ISA has a hard rule that catches first-time buyers off guard: you must hold the account open for at least 12 months before you can use it on a property. Open one the day you start looking and you cannot use the money to buy for a year.
Worse, if you withdraw the money for anything other than a qualifying first home or retirement at 60, you lose 25% of what you withdraw. That works out at a small net loss on your own contributions, because the bonus pays in at the rate the penalty takes out.
Open the account early. Even if you only pay in £1 to start, the clock begins ticking from day one.
When you actually get the bonus
Help to Buy ISA bonus is paid only on completion. Your solicitor applies for it just before exchange. This means you cannot use the bonus toward your deposit at exchange, only toward the balance at completion. Lenders know this and structure mortgages accordingly.
Lifetime ISA bonus is paid monthly into your account. By the time you are ready to buy, the bonus is already part of your balance and can be used as deposit at exchange.
Combining both: the 2026 rules
You can hold both a Help to Buy ISA and a Lifetime ISA in the same year. You can pay into both. You can claim the bonus on either one, but not on both for the same property purchase. Most savers run the Help to Buy ISA balance down toward the end and use the Lifetime ISA bonus on the property itself.
When the Help to Buy ISA is still the right choice
There is one scenario where keeping an existing Help to Buy ISA pays more than switching everything to a Lifetime ISA: you need cheaper access to your savings if life changes. Help to Buy ISA withdrawals before completion lose the bonus but not your contributions. Lifetime ISA early withdrawal forfeits 25%, which equates to roughly 6.25% of your own money.
If there is a real chance you might not buy a home (career break overseas, family circumstances), keep the Help to Buy ISA as the safer pot and put new money into a Lifetime ISA.
Practical plan for a 2026 first-time buyer
- If you have a Help to Buy ISA from before December 2019: keep it open, keep paying in up to £200/month until you are close to buying.
- Open a Lifetime ISA today even if you only put in £1. The 12-month clock starts on opening.
- Max the Lifetime ISA at £4,000 each tax year. That earns you the full £1,000 bonus annually.
- Use the Lifetime ISA bonus on the property purchase itself; run down the Help to Buy ISA toward the end if it is no longer beating the Lifetime ISA on annual contributions.
- Confirm with your conveyancer in good time that they have the Help to Buy ISA closing statement template, lenders refuse to complete without it.
Find a property the bonus actually covers
The Lifetime ISA £450,000 cap rules out a lot of London stock. Run a PropertyReportUK on any address before you offer to confirm the band, council tax, EPC and recent sold prices, alongside whether it qualifies for first-time relief. Get a report.