Savings & Investing

Help to Buy ISA vs LISA UK: Which Is Better for First-Time Buyers?

Complete comparison of Help to Buy ISA vs Lifetime ISA for UK first-time buyers. Bonuses, limits, withdrawal rules, and which account is best for your deposit.

By PocketWise · · 5 min read

Savings and investment information is for educational purposes only. The value of investments can go down as well as up. Cash savings up to £85,000 per person per institution are protected by the FSCS.

Both Help to Buy ISA and Lifetime ISA help first-time buyers save for a deposit with government bonuses. Here’s how they compare and which is better for you.

Quick Comparison

Feature Help to Buy ISA Lifetime ISA
Status Closed to new applicants Open
Annual contribution limit £2,400 (after first year) £4,000
Government bonus 25% 25%
Maximum bonus per year £600 £1,000
Maximum total bonus £3,000 No limit (to age 50)
Property price limit £250k (£450k London) £450,000 UK-wide
When bonus added At completion Monthly
Minimum age 16 18
Maximum age to open Closed 39

Help to Buy ISA: Key Details

Account Overview

Feature Details
Status Closed to new applicants (Nov 2019)
Type Cash ISA only
Interest Variable (typically low)
Contribution limit £200/month (£1,200 first month)

Bonus Structure

Savings Bonus (25%) Total
£4,000 £1,000 £5,000
£8,000 £2,000 £10,000
£12,000 (max) £3,000 (max) £15,000

Key Deadlines

Date What Happens
November 2019 Closed to new applicants
November 2029 Last date to save into account
November 2030 Last date to claim bonus

Limitations

Limitation Details
Property price £250,000 (or £450,000 in London)
Bonus timing Added at completion (not available for exchange)
Exchange deposit Cannot use bonus for it

Lifetime ISA: Key Details

Account Overview

Feature Details
Status Open to new applicants
Type Cash or Stocks & Shares
Investment options Savings account or investments
Contribution limit £4,000/year

Bonus Structure

Savings Bonus (25%) Total
£4,000 £1,000 £5,000
£8,000 (2 years) £2,000 £10,000
£20,000 (5 years) £5,000 £25,000
£40,000 (10 years) £10,000 £50,000

Withdrawal Rules

Purpose Penalty
First property purchase No penalty
After age 60 No penalty
Terminal illness No penalty
Any other reason 25% penalty (lose bonus + some savings)

Warning: 25% penalty on other withdrawals means you lose more than just the bonus.

LISA Penalty Example

Withdrawn Penalty (25%) You Receive
£5,000 (£4,000 + £1,000 bonus) £1,250 £3,750

You saved £4,000, get back only £3,750. The penalty exceeds the bonus.

Head-to-Head Comparison

Annual Contribution Power

Year Help to Buy ISA LISA
Year 1 £3,400 max £4,000 max
Year 2 £2,400 £4,000
Year 3 £2,400 £4,000
Year 4 £2,400 £4,000
Year 5 £2,400 £4,000
5-Year Total £13,000 £20,000
With bonus £16,250 £25,000

Winner: LISA allows faster saving with higher limits.

Property Price Limits

Location Help to Buy ISA LISA
Outside London £250,000 £450,000
London £450,000 £450,000

Winner: LISA has higher, more uniform limits.

When Bonus Is Available

Stage Help to Buy ISA LISA
Exchange of contracts Not available Available
Completion Available Available
Use for deposit Complicated Yes

Winner: LISA bonus available earlier in purchase process.

Flexibility

Scenario Help to Buy ISA LISA
Withdraw for non-property Lose bonus eligibility 25% penalty
Change mind about buying Can withdraw, lose bonus Penalty until 60
Keep for retirement Not designed for this Can use after 60

If You Have Both Accounts

The Rules

Situation What Happens
Have both accounts Allowed
Use both bonuses for one property Not allowed
Choose which bonus Must pick one

Strategy Options

Strategy Details
Use LISA for property Higher bonus potential, use at exchange
Withdraw HTB as cash Forfeit HTB bonus, keep cash
Use HTB for property If LISA penalty or limits apply

Which to Use for Property

Choose LISA If Choose HTB ISA If
Higher total savings Already maxed out HTB
Need bonus at exchange Property under £250k and HTB better
Property over £250k (outside London) Near HTB deadline

Timeline Comparison

Saving £20,000 Deposit

Timeline Help to Buy ISA LISA
With HTB ~7 years to £20k + £3k bonus 5 years to £20k + £5k bonus
Total buying power £23,000 + interest £25,000 + any growth

Cash vs Stocks & Shares LISA

For House Deposits

Factor Cash LISA S&S LISA
Timeframe <3 years Recommended Risky
Timeframe 3-5 years Usually safer Consider
Timeframe 5+ years Option Good option
Capital guarantee Yes No

General rule: Cash LISA for buying within 5 years. S&S LISA if 5+ years away.

Pros and Cons Summary

Help to Buy ISA

Pros Cons
Simple cash savings Closed to new applicants
Established scheme Lower contribution limits
Bonus only at completion
Lower property price limits
Ends completely 2030

Lifetime ISA

Pros Cons
Higher contribution limit 25% penalty for other withdrawals
Higher property price limit Must be 18-39 to open
Bonus added monthly
Investment option available
Can use for retirement
Available to new applicants

Decision Framework

New First-Time Buyers

Situation Recommendation
Starting to save now Open LISA (HTB closed)
Buying within 5 years Cash LISA
Buying in 5-10+ years Consider S&S LISA

Existing HTB ISA Holders

Situation Recommendation
Saving steadily Consider opening LISA too
Near HTB max (£12k) Add LISA for more bonus
Buying soon Use whichever has more
Buying 3+ years away Maximise LISA contributions

Have Both Accounts

Situation Strategy
Similar balances Use LISA (better limits/timing)
HTB much larger May use HTB bonus
Buying >£250k outside London Must use LISA
Want flexibility Keep LISA for retirement option

Important Considerations

First-Time Buyer Definition

Requirement Details
Never owned property In UK or worldwide
Buying to live in Not buy-to-let
Both partners qualify If buying jointly

Mortgage Compatibility

Factor Details
Lenders accepting LISA Most do now
Bonus timing Must coordinate with conveyancer
Documentation Need LISA statement

Buying Process

Step LISA HTB ISA
1 Request withdrawal Request closing statement
2 Provider sends to conveyancer Conveyancer claims bonus
3 Bonus available at exchange Bonus arrives at completion
4 Complete purchase Complete purchase

Summary

Factor Help to Buy ISA Lifetime ISA Winner
Available now No Yes LISA
Annual limit £2,400 £4,000 LISA
Max bonus £3,000 Unlimited LISA
Property limit £250k/£450k £450k LISA
Bonus timing Completion Exchange LISA
Flexibility Forfeit bonus 25% penalty Draw

Key points:

  • LISA is better for most first-time buyers
  • Help to Buy ISA closed to new applicants in 2019
  • Can hold both but only use one bonus for property
  • Cash LISA for buying within 5 years
  • Don’t withdraw LISA for non-property unless desperate (25% penalty)
  • Help to Buy ISA must be used by November 2030

For more guidance:

Sources

  1. Gov.uk — Help to Buy ISA
  2. Gov.uk — Lifetime ISA
  3. MoneyHelper — ISAs