On the 22^nd December 2025, the Government further clarified the future of the LISA and the LISA replacement. They now say:

"The government will consult on introducing a new, first time buyer only product that will provide the bonus when a person uses it to buy a house, removing the need for a withdrawal charge and giving savers flexibility in case their circumstances change. It will remain possible to open a Lifetime ISA until the new product becomes available and for account holders to continue to save into their Lifetime ISA in line with the existing rules indefinitely."

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There are three things to consider here:

• A shift back to a help-to-buy style bonus structure

• A narrow window to secure the ability to use a LISA beyond closure optionality

• Existing LISA rules are likely to be preserved

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1. We’re shifting back to help-to-buy style bonus structure

The first is that we appear to be moving back to a structure akin to the help to buy ISA. This worked by giving the holder a bonus on their account balance at the point of home purchase. There was never any problem with withdrawal penalties here given the bonus came at the end. The downside of this product was the low limits available, that is a £1,000 initial deposit and £200 per month cap (ultimately with a £3,000 government bonus cap).  

This product also had a downside compared to the LISA in that the LISA provides a front-loaded bonus which can earn further interest compared to the help to buy ISA. As the LISA can be invested, this compounding potential became similar to how a pension operates.

We do not know yet whether the replacement for a LISA will be able to be invested, or be a cash-based product.

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2. There’s a narrow window to secure LISA optionality

The second thing is that it will remain possible to open a LISA until the new product becomes available. This creates a potentially small window in which advisers may be able to position clients with access to both options. We don’t know how much time there will be between new product announcement and the closure of the LISA and it makes sense to pre-empt this by trying to get people in place with a LISA as soon as possible. For those who may not benefit from the homebuying side, there is the ability to use this product as a retirement saving vehicle and being able to open a LISA before 40 and contribute before 50 gives people choice and options. The new product is based on the way the Government is framing things, aiming at returning to the spirit of first time buyer only. This will mean there is a loss in a potentially useful tax wrapper for those who do not need the first time buyer benefit.

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3. Existing LISA rules are likely to be preserved

The third part is that we have an indication of the current LISA rules being upheld indefinitely. This is even more reason to consider opening a LISA as it may be that the new rules with the new product are less effective for some clients, less valuable for others or, as highlighted, not able to be used entirely by those who have already bought/own a property.

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What should advisers be doing now?

Ultimately, we know the LISA is closing in the near(ish) future, we know it will be allowed to stay active and open for those with one and we don’t know what the new product will look like.  

It is therefore worth considering the benefit of having all clients under 40 who do not own a LISA be made aware that they should consider opening one.

These can be opened and maintained with a £1 contribution so require no ‘commitment’ of capital. For those who will depend on a LISA for it’s original purpose (these might be your clients’ children/grandchildren) they have the chance to see what the new product looks like and whether that offers a more suitable option.  

For other clients, they get to lock into the option of a tax wrapper that can be used now or if their circumstances change.

It would not be a particular surprise to hear that the new product cannot be used in conjunction with the LISA. Presumably there would be a need to consider which product to use in this instance and for those with existing LISA balances, it may bring a choice as to whether to maintain or close the product. Starting a new LISA with £1 to get one open will be no burden for those who want the choice at least.  

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Key takeaways

• The lifetime ISA is being phased out

• The replacement product will likely be first-time buyer only and it is not clear whether it will be able to be invested like the LISA can be

• New LISAs can only be opened while the product remains available, which is likely to end at some point in 2026 (or 2027).

• Existing LISAs will continue indefinitely under current rules. There is little downside to opening a LISA now, and doing so preserves optionality

If you’d like more information about the phase-out of LISA and the planning implications for your clients, including templated letters, do get in touch – our experts are always on hand to chat.

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