Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Solutions. Read the original article for full details.

Government Consults on New FTB ISA to Replace Lifetime ISA

The government has published a consultation on the introduction of a new First Time Buyer ISA (FTB ISA), which is intended to replace the Lifetime ISA (LISA). The move follows evidence that the LISA does not work well for many people, with the government describing it as a flawed product.

The proposed FTB ISA will offer a government bonus to first-time buyers, which will be paid at the point of withdrawal when purchasing a first home. The government aims to make both cash and stocks and shares versions of the FTB ISA available, with the bonus paid on net subscriptions.

ISA managers will be able to set their own interest rates and offer their own investment products or portfolios. Individuals will be able to subscribe up to an annual limit, with the government bonus accumulating as they save. The bonus will not be paid out immediately, but will be available to use towards a house deposit when the individual is ready to purchase their first property.

The government intends to replicate aspects of the LISA and Help to Buy ISA frameworks where possible. ISA managers will be required to report details such as subscriptions and transfers to HMRC, and ensure individuals do not exceed subscription limits.

Conveyancers will have primary responsibility for ensuring compliance, as they are expected to have access to all relevant information, including the mortgage offer, proof of funds, and confirmation that the buyer is a first-time purchaser. They will need to complete a Conveyancers Declaration Form to confirm eligibility for the government bonus.

HMRC will pay the bonus if the property purchase is completed within 90 days, calculating the bonus as a percentage of subscriptions made. To claim the bonus, the conveyancer will notify the FTB ISA manager, who will then claim the funds from HMRC and release them to the conveyancer.

The government has also proposed new transfer rules to prevent circumvention of ISA limits and bonus eligibility. Transfers will be permitted between cash-based ISAs and between stocks and shares ISAs, as well as from cash-based to stocks and shares-based ISAs. However, transfers from stocks and shares-based ISAs will be banned. The property price cap for the FTB ISA has not yet been confirmed, but is expected to match those of the LISA and Help to Buy ISA.