Lifetime ISAs and Help to Buy ISAs are both government-backed schemes to help you save for the future. Both are suitable for first-time buyers, and offer big cash bonuses from the government.
Let's run through the key differences.
Help to Buy ISA
The important thing to say first of all is that you can no longer open a new Help to Buy ISA. If you already have one you can save into it until 30 November 2029, with a further 12 months to claim your bonus until 1 December 2030.
These were designed for first-time buyers aged over 16, looking to save for their first home. Here's the key criteria:
25% government bonus up to a maximum bonus of £3,000.
Use it to buy a home worth up to £250,000, or up to £450,000 in London.
The bonus is paid when you buy, and funds are available on completion.
If withdrawing for any reason other than buying your first home, there are no government charges but also no bonus is paid.
Pros:
There are no withdrawal penalties
You can withdraw to buy as soon as you've saved £1,600
Cons:
The maximum bonus is £3,000
Only one lump sum deposit is allowed, and £200 maximum monthly thereafter
You can only save up to £2,400 each year
It's closed to new savers!
No Stocks & Shares options
Lifetime ISA
These are designed for people saving toward their first home deposit or retirement, aged between 18-39. Here's the key criteria:
25% government bonus up to a maximum bonus of £32,000
Use it to buy a home worth up to £450,000 anywhere in the UK
The bonus is paid monthly
If withdrawing for an ineligible reason, there is a 25% penalty
Pros:
Much larger bonus available (£1,000 each tax year for 32 years)
Can be used to save for retirement
Bonus is paid monthly, which means you'll earn interest on the bonus too
Buy up to £450,000 anywhere in the UK
Cons:
25% penalty for early or ineligible withdrawals. You'll need to have your account open for 12-months before withdrawing and meet the other eligibility requirements.
You can only open if you're aged between 18-39
Can I use a Help to Buy ISA and a Lifetime ISA?
You can keep a Help to Buy ISA and a Lifetime ISA open, but you can only use the bonus from one of the accounts. Many customers will opt to transfer their Help to Buy ISA into a Lifetime ISA because of the higher bonus allowance!