The government is set to consult on lifetime Isa reform in early 2026, with plans to scrap the product.
Following this consultation, it will replace the product, which was introduced in 2017, with a fresh Isa aimed at first time buyers.
The Budget said: “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.
Budget 2025: chancellor reduces cash Isa allowance to £12k for under-65s
“Once available, this new product will be offered in place of the lifetime Isa.”
It comes after the chancellor announced changes to the cash Isa which will see the allowance reduced to £12,000 for under 65s.
Rachael Griffin, tax and financial planning expert at Quilter, welcomed the changes to the “confused product”.
She said: “As it currently stands, the lifetime Isa has attempted to serve two distinct goals – saving for retirement and saving for a first home – but has failed to meet either effectively.
“While the 25 per cent government bonus has been undeniably popular, the product itself has carried serious flaws and the withdrawal penalty has punished savers at a time when they have faced significant financial strain.”
Many critics of the product have long been calling for the £450,000 house price cap, which has remained the same since it was launched, to be increased.
Griffin added: “For many first-time buyers, the Lisa has provided genuine help, and a simplified offering should continue to meet the same need.
“However, there will be questions marks over how and if existing Lisa holders will be affected, and the government will need to ensure they are not disadvantaged.”
Carol Knight, CEO of The Investing and Savings Alliance, said the government “must protect the strengths of the Lisa”.
She said: “This is a moment for sensible reform of the Lifetime Isa, not a rush to scrap it.
“Lisas have helped a generation of first-time buyers save for a deposit and, crucially, given many – particularly the self-employed – a simple, engaging way to build retirement savings.”
tara.o’connor@ft.com
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