The Government has confirmed it is to publish a consultation in early 2026 on the Lifetime ISA.

It said it will consider the implementation of a “new, simpler product” to support first-time buyers to buy a home, which when available would take the place of the Lifetime ISA.

In Chancellor Rachel Reeves’ Budget yesterday, she announced plans to reform the way ISAs work by cutting the tax-free cash ISA allowance to £12,000. The £20,000 tax-free threshold on all ISAs is remaining, although £8,000 of this will be exclusively for stocks and shares investment from 2027. Over-65s will retain the full cash allowance, however.

For now, the annual subscription limit for the Lifetime ISA will remain at £4,000.

Head of markets at AJ Bell, Dan Coatsworth, said the Government looks “ready to hammer a nail into the Lifetime ISA’s coffin”, but warned the consultation would “add more confusion” to the ISA landscape.

“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,” Coatsworth commented.

“Lifetime ISA providers have repeatedly asked policymakers to look at fixing these problems to help savers and investors.”

Coatsworth added that replacing the Lifetime ISA could essentially mean bringing back the Help to Buy ISA under a “new guise”.

“The Government is keen to help more people get on the housing ladder and any financial incentives to support those hoping to achieve this dream will be welcome,” he continued.

“It begs the question as to what will happen to existing Lifetime ISA customers. Those using the account for retirement savings will want to know if they’re stuck in a legacy account, or if they are able to transfer to a different account. Through this consultation process, the Government needs to make sure consumers come first and that the number one priority is for existing Lifetime ISA customers to get a good outcome.”

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