Lifetime ISA, Junior ISA & Help-to-Buy Explained

Beyond the standard Cash and Stocks & Shares ISAs, there are targeted “special ISAs” designed for specific purposes – buying your first home, saving for retirement, or putting money aside for children. These can be highly valuable, but they come with strict eligibility rules and penalties if used incorrectly.

One point of confusion: people still ask about the Help-to-Buy ISA. This product is closed to new applicants. The Lifetime ISA effectively replaced it as the government’s main home-buying savings vehicle. We include Help-to-Buy here because many existing accounts are still open and in use, but for anyone starting today, the Lifetime ISA is the relevant option.

A quick refresher on ISA rules

• All ISAs share the same £20,000 annual allowance (2025/26).
• You can divide this allowance across different types, but you cannot exceed the overall cap.
• The Lifetime ISA counts towards this £20,000 limit.
• Junior ISAs sit outside the adult allowance and have their own annual cap.

Special ISAs add targeted benefits but also lock in your money under stricter rules. Misunderstanding them can lead to unintended consequences, penalties or missed government bonuses.

Lifetime ISA (LISA)

The Lifetime ISA is the government’s current scheme for first-time buyers and long-term retirement savers.

Key rules:

• Available if you are 18–39 years old.
• Contribute up to £4,000 per year (counts towards £20,000 ISA limit).
• Government adds a 25% bonus each year, up to £1,000 annually.
• Use for:
  • First home purchase (property value up to £450,000, UK only).
  • Retirement savings, accessible at age 60.

Penalties: Withdrawals for other reasons incur a 25% charge. This takes away the government bonus and some of your capital.

Example: Contribute £4,000. The government adds £1,000. Your pot is £5,000. If you withdraw early, the 25% penalty cuts it to £3,750. You lose the £1,000 bonus plus £250 of your own savings.

Caveat: LISAs are unsuitable if you may need flexible access. They work best for committed first-time buyers or people confident about locking money until 60.

Personal perspective: For a few years I put money into a LISA because I saw all my long-term savings as part of my pension. Getting the extra 25% felt like free money. But as my income rose and my pension pot grew, the LISA became less of a priority. Right now I value access and optionality more than optimisation. I will probably return to it in future, but the lesson for me is that the “best” product on paper does not always fit with the stage of life or priorities you’re in.

Junior ISA (JISA)

Junior ISAs are designed for children under 18. They build wealth free of tax until adulthood.

Key rules:

• Opened by a parent or guardian, but anyone can contribute.
• Annual allowance of £9,000 (2025/26), separate from the adult limit.
• Two types: Cash JISA and Stocks & Shares JISA.
• Locked until age 18, then automatically converts into an adult ISA.

Example: Saving £100 a month from birth until 18 totals £21,600 in contributions. Returns from cash or investments could make the pot much larger, but of course, investments carry risk.

Caveat: At 18, the money becomes fully accessible to the child. Parents must be comfortable handing over control at that point.

Personal perspective: I opened a JISA for my daughter and match contributions from family members who give her money at birthdays or Christmas. But I don’t prioritise adding much myself. There are too many competing uses for my money right now, and I don’t have a spare £9k lying around each year. For me it feels more useful to give support directly now and reassess later. I suspect JISAs work best for grandparents or great-grandparents who want to make tax-efficient gifts over time, rather than for parents still juggling mortgages, childcare, and day-to-day costs.

Help-to-Buy ISA (legacy product)

The Help-to-Buy ISA was introduced in 2015 for first-time buyers. It closed to new accounts in November 2019, but existing accounts can still be used until 2029.

I include it here because I still hear people talk about it, and some savers are still paying into them. For new savers, the Lifetime ISA is the current route. But for those that have one, contributions are limited and the bonus is only applied on completion of a property purchase, not annually. The Lifetime ISA offers higher limits and broader use.

Key rules:

• Maximum £200 monthly contribution plus there was a £1,000 initial deposit.
• Government adds 25% bonus at home purchase, up to £3,000.
• Only available for first homes.

Example: Contributing £200/month plus the initial £1,000 for 5 years produces £13,000. With the bonus, the final pot is £16,000.

Side-by-side comparison

Practical considerations

• Allowance interaction: LISA contributions come out of your adult £20,000 limit. JISA contributions are separate.
• Bonus timing: LISA bonuses are paid annually. Help-to-Buy bonuses are only added at home purchase.
• Suitability:
  • A 30-year-old saving for a first home today is often best served by a LISA, but only if they are confident they won’t need the money early and it will sit within the property limit (location matters!).
  • Parents weighing up a JISA should ask whether tying money up until age 18 is the best use of funds versus helping in real time with things like childcare or education. JISAs can be brilliant for grandparents making regular gifts, but less compelling if your own finances are stretched.
  • Existing Help-to-Buy ISA holders can keep using them, but many may benefit from transferring to a LISA for higher limits and more flexibility.

Conclusion

Special ISAs can be powerful tools when used correctly. A Lifetime ISA offers unmatched government top-ups for first homes and retirement, a Junior ISA is the cleanest way to save tax-free for children, and Help-to-Buy ISAs remain relevant for legacy account holders.

The common thread is that each comes with restrictions. Used for the right purpose, they deliver excellent value. Used incorrectly, they can backfire.

In the next post we will look at Innovative Finance ISAs, a niche but higher-risk option that sits outside the mainstream.