Our response to HM Treasury’s First Time Buyer ISA consultation

TheCityUK supports the introduction of a new First-Time Buyer ISA to help more people save for their first home. To deliver the government’s objectives of encouraging long-term saving and investment, we believe that the product must be simple for consumers to understand, accessible to prospective buyers and straightforward for providers to administer.

Key Asks:

1. Simplicity and clarity: The government should prioritise a simple, clear and consistent framework for the new FTB ISA.  Savers make long-term financial decisions based on the expectation of a stable regime, so operational requirements, compliance checks, and bonus calculations should be proportionate and easy to understand.

2. Higher property price cap: We recommend raising the property price cap from the current £450,000 (Lifetime ISA) to at least £500,000, reflecting house price growth forecasts and variations across regional housing markets.

3. Bonus structures and conveyancer role: We support annual and lifetime caps on the government bonus to manage the fiscal impact. The bonus calculation should be simple and, ideally, based on the account value rather than complex withdrawal calculations. Paying the bonus earlier would help buyers build their deposit. If it remains linked to completion, the conveyancer, rather than the ISA manager, should be responsible for applying for it.

4. Withdrawal rules: We support the government's proposal not to impose a withdrawal charge, recognising that savers’ circumstances can change. Withdrawal rules should be clear and written in plain English, with a more flexible completion window than the proposed 90 days.

5. Transfers and existing ISAs: Preventing transfers from a Stocks & Shares ISA into an FTB ISA runs counter to the government's policy objective of encouraging greater participation in investing. Savers should be able to use their savings in a way that supports their financial goals.

6. Align anti-avoidance measures with policy intent:  Anti-avoidance measures should be proportionate and targeted.  Overly complex rules  undermine the simplicity of ISA products and risk reducing take-up of them.

7. Operational considerations: HMT should set out clear responsibilities between ISA managers, conveyancers, and HMRC, and clear processes for handling delayed or failed property transactions.

The new ISA should form part of a stable, coherent savings and investment framework that supports first-time buyers without creating unnecessary complexity for consumers and providers. It must be easy to understand and administer, while complementing the government’s wider ambition to encourage long-term saving, investment, and financial resilience.

As we set out in From cash to confidence: Building an investing nation, the government should use the introduction of a new First-Time Buyer ISA to establish a longer-term ‘North star’ for individual investment.  This should set the principles to guide the future developments and changes to the wider ISA regime.