The Motley Fool

Forget buy-to-let. I think a Lifetime ISA is a better strategy to target a million

For many individuals, becoming a property investor is a lifetime ambition. Although there could still be significant capital growth ahead for the sector over the long run, various changes to the industry have meant it’s now more challenging to generate the level of returns seen in the last couple of decades.

In contrast, products such as a Lifetime ISA are making it easier to access the stock market, while providing greater incentive to do so. As such, as the ISA deadline approaches (6 April), investing through a Lifetime ISA rather than in a buy-to-let could be a shrewd move.


The government provides an incentive for investing this way. It provides a bonus of 25% on all amounts invested, which could equate to as much as £1,000 per year. This means anyone who opens and invests in a Lifetime ISA could be in profit without having risked their capital.

Over the long run, this could mean they’re eligible to receive up to £32,000 in government bonuses, since they’re paid to individuals aged 18-50. Should those amounts be invested in FTSE 100 or FTSE 250 shares, they could amount to significant sums in the long run.

As well as a bonus, a Lifetime ISA offers tax efficiency. It’s not subject to capital gains tax or dividend tax, which means the returns available could be significant compared to buy-to-let.

Changing rules

In contrast, investors seem to be increasingly disincentivised from undertaking a buy-to-let. For example, there’s now a 3% stamp duty surcharge on second homes, while mortgage interest payments cannot be deducted from rental income for many landlords. And with capital gains tax applicable to buy-to-lets, the net returns available over the long run could be somewhat limited versus their historic levels.

Furthermore, it’s becoming more difficult to obtain finance for a buy-to-let. Changes to regulations mean  there must be greater interest cover in case interest rate rises are ahead over the medium term. This may mean that buy-to-let investors are unable to generate the same level of cash flow as they have been able to in the past, which may increase their risks should there be void periods or repairs required to their property.


While buy-to-let investing may remain popular over the near term, with slow growth in house prices potentially tempting investors to take the plunge, the reality is that a Lifetime ISA could offer greater rewards, as well as lower risks.

With the government incentivising people to invest through a Lifetime ISA and discouraging buy-to-let investing through tax changes and more onerous regulatory updates, now could be the right time to focus on the stock market. With the FTSE 100 and FTSE 250 appearing to offer good value for money, it may be possible to generate a sizeable portfolio in the long run.

You Really Could Make A Million

Of course, picking the right shares and the strategy to be successful in the stock market isn't easy. But you can get ahead of the herd by reading the Motley Fool's FREE guide, "10 Steps To Making A Million In The Market".

The Motley Fool's experts show how a seven-figure-sum stock portfolio is within the reach of many ordinary investors in this straightforward step-by-step guide. Simply click here for your free copy.