Will the UK government scrap Lifetime ISAs?

10 February 2025

The Lifetime ISA (LISA) is one of four adult ISA options that could help you save and invest efficiently.

Introduced by former chancellor, George Osbourne, in 2016, the LISA has two key purposes:

• Helping first-time buyers place a deposit on their home
• Supplementing retirement income for those over 60.

Indeed, the LISA shares similar functions to Cash ISAs and Stocks and Shares ISAs, but with additional perks and restrictions.

Firstly, there is a distinct advantage to saving into a LISA – everything you put in up to the annual subscription limit is topped up by 25% by the government. So, if you put £4,000 into your LISA, your balance would increase to £5,000.

The restrictions are:

• The annual LISA subscription limit is £4,000, making up part of your overall £20,000 adult ISA contribution allowance.
• You have to be aged 18 and 40 or under to set up a new LISA.
• Your LISA funds can only benefit from a bonus if they are used either to purchase your first home, if you have been diagnosed with a terminal illness with less than 12 months to live, or if you withdraw the funds after the age of 60. If you use the money for a different reason, you’ll lose the government’s 25% top-up.

While many still use LISAs to build wealth for the future, their effectiveness in the modern saving and investing landscape has recently been called into question.

Keep reading to find out the latest developments, whether the government might scrap LISAs, and what this could mean for you and your family.

The Treasury Select Committee has called for evidence that the Lifetime ISA remains “fit for purpose”

The Treasury Select Committee exists to monitor and scrutinise the spending of HM Treasury in the UK.

On 7 January 2025, it published a report calling for evidence that the LISA is still “fit for purpose in its current design” and questioning whether it provides “value for money for the government”, among other factors.

This comes after the Autumn Budget of 2024, in which the chancellor elected not to raise the ISA subscription limit nor amend the structure of ISAs in any way. The £4,000 LISA subscription limit has not increased since 2016, when of course, the real-terms spending power of this sum has decreased in the meantime.

While it is yet unclear how the government will respond to the Treasury Select Committee’s scrutiny, it is possible that the LISA could be amended or scrapped in future.

Here’s what this might mean for you and your family.

3 possible outcomes from the Treasury Select Committee’s scrutiny of Lifetime ISAs

1. The LISA might be scrapped altogether

If the government decides to do away with the LISA altogether, this could mean any funds you hold within a LISA is transferred to another ISA of your choice.

Alternatively, as was the case with Help to Buy ISAs, the LISA may be made unavailable for new subscribers but remain open to those who have existing LISAs in place. This means the government would be “phasing out” the LISA rather than completely scrapping the product and moving existing funds elsewhere.

2. An amendment to the LISA could mean you benefit from better savings opportunities

There is a chance that upon review, the government might decide to increase the annual LISA subscription limit and/or make changes to the top-up system.

In addition, the rules could change regarding who can open a LISA, what the funds can be used for, and the tax implications of taking money out.

If these developments do occur, speaking to a financial planner about how they might affect you and your family could be an appropriate course of action.

3. The LISA could remain in its current form for the foreseeable future

Although the Treasury Select Committee has asked for evidence that the LISA is still fit for purpose, it may be satisfied, upon reflection, that this is the case. So, there could be no change to the LISA, and you may still be able to open, pay into, and use this type of account for the foreseeable future.

Get in touch to learn more about making the most of Lifetime ISA savings

Depending on your circumstances, a LISA could be a helpful piece in the complex puzzle of your financial plan. They aren’t a one-size-fits-all solution that benefits everyone, though – which is why we recommend speaking with a professional before opening one.

Email info@depledgeswm.com or call 0161 8080200.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.