First things first. Whatever else you choose to do, you should absolutely without question open a Lifetime ISA (LISA) if you’re the type who likes the idea of spending your retirement bathing in tubs of free government provided money. LISAs can be opened by any UK resident over 18, and provide a 25% matching bonus for any deposits up to the maximum £4,000 every year until you turn 50. For non-math people, that’s a potential £32,000 given to you by the government. LISAs can be either invested in cash or stock and share ISAs, and any growth within the account isn’t considered taxable income by HMRC. The money can either be withdrawn after 60, or used to buy a first home provided it’s under £450,000.
Help to Buy: ISAs have a much more limited purpose, as their name probably gives away — they’re designed specifically to help first time homebuyers save for the deposit on a house under £250,000 (£450,000 if the house happens to be in London.) They can be invested in cash ISAs only, and though they too provide a 25% free kickback from the government on any savings, you’re only allowed to deposit up to £200 a month (plus an extra £1,000 the first month you open it), and the maximum bonus you’ll receive from the government is £3,000 — £29,000 less than the LISA max payout. So what possible harebrained justification might someone use to choose a Help to Buy over a Lifetime ISA? One very sensible reason, actually: you must hold a Lifetime ISA for a full year before withdrawing from it to buy a house, but you’re free to withdraw money from a Help to Buy ISA anytime after you’ve got at least £1,600 in the account, which can be accomplished in three months if you deposit the maximum possible.
So the LISA is your longterm best bet, but if you haven’t opened either account and hope to buy a house in less than a year, you’re probably better off taking advantage of the Help to Buy: ISA. But hurry. After 30 November 2019, the program closes to new savers.