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The Independent UK
The Independent UK
National
Albert Toth

What are the penalties for Lifetime ISA withdrawals and why are they soaring?

Lisa
  • HMRC data shows LISA holders lost nearly £119m in unauthorised withdrawal charges between April 2025 and March 2026, with 154,100 people losing an average of £3,088 each.
  • Unauthorised withdrawals exceeded authorised home purchase withdrawals for the fourth consecutive year, despite a record 99,570 people using their LISA to buy a first home.
  • The scheme's £450,000 property value cap has remained frozen since 2017, forcing many savers to pay penalties as UK house prices have risen significantly.
  • The 25 per cent charge on total balance withdrawals leaves savers facing an effective 6.25 per cent penalty beyond losing government top-ups.
  • The government plans to launch a new First-Time Buyer ISA to replace LISAs and remove the punitive withdrawal penalty.

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