Consultation response: First Time Buyer ISA
The ATT has responded to the HMRC consultation on the proposed First Time Buyer ISA ('the Consultation'). This consultation seeks views on the implementation of a new, simpler ISA product to support savers to buy a first home. Once available this new product will be offered in place of the existing Lifetime ISA (LISA).
In the ATT's response, we highlighted some of the differences between the conditions to be a ‘first-time buyer’ for the proposed First-Time Buyer (FTB) ISA and to be a first-time buyer for Stamp Duty Land Tax (SDLT) purposes in England and Northern Ireland. There is a risk that the differing conditions will cause additional challenges for first-time buyers as in some circumstances they could be considered a first-time buyer for SDLT purposes, but not for FTB ISA purposes - and vice versa.
Although not specifically a tax issue, we also highlighted potential issues for savers into stocks and shares based FTB ISAs, given the restrictions for under 65s on cash savings into ISAs from 6 April 2027.
The current proposals for the FTB ISA are that individuals with FTB ISAs in stocks and shares will not be allowed to move the funds into a FTB cash ISA prior to purchase. This means that purchasers cannot lock in gains or ‘de-risk’ their savings in the run up to a purchase. Given that the value of stocks and shares can change significantly in a short period of time – and that first-time buyers may not necessarily be able to make up any shortfalls at short notice – we feel that this
should be reconsidered.
A first-time buyer is likely to want to ‘lock in’ the value of their ISA close to purchase to ensure they have sufficient funds to proceed. We consider that transfers into cash should be allowed at a point prior to completion to provide certainty. Potential transfer points might be at the offer or exchange stage. If funds in a stocks and shares ISA were to fall in the period between having an offer accepted and completion, this could cause purchases to fall through if the individuals do not have the ability to make up any shortfall at the last minute. This risk may discourage savings into stocks and shares FTB ISAs, which runs counter to the Government’s policy to encourage more ISA savings outside of cash.