MSE News: Martin Lewis: Is a Lifetime ISA win coming in the Budget?

Oasis1

It sounds like there's a lot of potential changes on the table. Hoping they adjust the £450k limit by inflation, remove 6.25% penalty for withdrawing in some or all circumstances (if they don't, they should remove it from means testing for UC) and make it more attractive for banks to offer the product (e.g. reducing complexity etc) in hope that more competition means better rates for savers.

Also - if they do find that it's mainly wealthy people who could afford to purchase property anyway, at a significant cost to the tax payer, then work needs to be done to reduce that and improve accessability for the people who genuinely need it.

MeteredOut

Oasis1 said:

It sounds like there's a lot of potential changes on the table. Hoping they adjust the £450k limit by inflation, remove 6.25% penalty for withdrawing in some or all circumstances (if they don't, they should remove it from means testing for UC) and make it more attractive for banks to offer the product (e.g. reducing complexity etc) in hope that more competition means better rates for savers.

Also - if they do find that it's mainly wealthy people who could afford to purchase property anyway, at a significant cost to the tax payer, then work needs to be done to reduce that and improve accessability for the people who genuinely need it.

How do they differentiate between someone who can afford a £450K house and is wealthy and someone who can afford a £450K house but who genuinely needs the additional support?

fistfulofsteel

I'm currently preparing to buy my first home (from a relative). I have enough money to buy in cash, but as I'm unlikely to have much income going forward I'd like to not have money tied up in a LISA preventing me from claiming UC. I could try to get a minimal mortgage purely to unlock the LISA , but with very little income it seems unlikely. Would it be worth trying to put off the purchase to see whether and how the LISA rules will be revised?

masonic

fistfulofsteel said:

I'm currently preparing to buy my first home (from a relative). I have enough money to buy in cash, but as I'm unlikely to have much income going forward I'd like to not have money tied up in a LISA preventing me from claiming UC. I could try to get a minimal mortgage purely to unlock the LISA , but with very little income it seems unlikely. Would it be worth trying to put off the purchase to see whether and how the LISA rules will be revised?

Delaying your purchase is likely to be more costly than simply exiting the LISA and paying the 6.25% net penalty. Of course you wouldn't need to do that immediately or all at once, so if the penalty is reduced or LISAs are eventually converted to ISAs you may avoid it.

Perhaps you won't need to claim UC and reach the age of 60 where you could withdraw penalty free under the current rules. Stranger things have happened.

MSE_Helen_K

Hi all, I'm just updating this thread with the latest on Lifetime ISAs ahead of the upcoming Budget on 26 November 2025...

Read the full story:

'Martin Lewis: We may finally see some changes to the Lifetime ISA in the Budget'

If you haven’t already, join the forum to reply.

SpinksyJ

Hi everyone. My wife and I bought our first house a couple of years ago, that was frustratingly just over the £450k limit. We'd saved up a sizeable amount in our lifetime ISA, but knowing changes may be on the way, we didn't want to pay the penalty - so essentially just gave a smaller deposit (and took the temporary hit on more interest). Do you know if we will retrospectively be able to take our money out without a penalty if the cap changes - as in, we want to put it against our mortgage next time we get a new fix? It would still technically be used to help purchase our first house? I wish they'd just remove the penalty to make it simpler!

eskbanker

SpinksyJ said:

Hi everyone. My wife and I bought our first house a couple of years ago, that was frustratingly just over the £450k limit. We'd saved up a sizeable amount in our lifetime ISA, but knowing changes may be on the way, we didn't want to pay the penalty - so essentially just gave a smaller deposit (and took the temporary hit on more interest). Do you know if we will retrospectively be able to take our money out without a penalty if the cap changes - as in, we want to put it against our mortgage next time we get a new fix? It would still technically be used to help purchase our first house? I wish they'd just remove the penalty to make it simpler!

Despite all the endless speculation, nobody knows if the rules will be changed at all, and even if they are, there's no detail available at this stage (although I'd be amazed if some sort of retrospective reconciliation like that was to be included), but there are only a couple of days more to wait to find out....

eskbanker

One of the less-publicised announcements today, although perhaps unsurprising given the lack of clarity:

4.230 Lifetime ISA Reform – 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.  

https://assets.publishing.service.gov.uk/media/6926eb102a37784b16ecf525/E03444720_Budget_2025_Web_Accessible.pdf

dcs34

eskbanker said:

One of the less-publicised announcements today, although perhaps unsurprising given the lack of clarity:

4.230 Lifetime ISA Reform – 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.  

https://assets.publishing.service.gov.uk/media/6926eb102a37784b16ecf525/E03444720_Budget_2025_Web_Accessible.pdf

So, in short, no, there is no LISA win. Nothing to help those currently locked into a £450k limit/6.25% penalty trap. Just more consultations and confusion to push the issue out another year.

Being cynical but I doubt many MPs and officials in HMT have a LISA as a first time buyer. Whereas £20k for S&S ISAs...different story.

eskbanker

dcs34 said:

eskbanker said:

One of the less-publicised announcements today, although perhaps unsurprising given the lack of clarity:

4.230 Lifetime ISA Reform – 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.  

https://assets.publishing.service.gov.uk/media/6926eb102a37784b16ecf525/E03444720_Budget_2025_Web_Accessible.pdf

So, in short, no, there is no LISA win. Nothing to help those currently locked into a £450k limit/6.25% penalty trap. Just more consultations and confusion to push the issue out another year.

Indeed, and since there was already a recent consultation run by the treasury select committee, which the government chose to ignore, it's difficult to avoid cynicism about kicking the can down the road, although I suppose it could be argued that they concluded that tinkering with the existing product wasn't viable and that it needed to be replaced entirely....

https://forums.moneysavingexpert.com/discussion/6628570/mse-news-government-fails-to-act-on-lifetime-isa-fines