LISA Early Withdrawal — How Much Will You Lose?
Frequently Asked Questions
A 25% withdrawal charge applies to any withdrawal not for a qualifying purpose (first home purchase, age 60+, or terminal illness). This charge is levied on the entire balance — contributions plus bonus.
The 25% charge is applied to the total balance (your money plus the government bonus). If you contributed £4,000 and received £1,000 bonus (25%), the 25% charge on £5,000 = £1,250 — more than the £1,000 bonus you received.
You lose 6.25% of your own contributions due to the penalty structure. For every £100 you contributed, you receive back £93.75 (not £100) after the withdrawal charge.
HMRC temporarily waived the penalty during the COVID-19 pandemic (2020-2021), reducing it to 20% to return only the bonus. This waiver has now ended and the 25% rate applies.
The property must cost £450,000 or less. Both the property value limit and the LISA scheme itself have been subject to calls for reform as property prices have risen.
Yes. Two people can each use their own LISA to buy a property together, even if one buyer has previously owned a property (though both must be first-time buyers in that case to avoid the penalty on the other's LISA).
You can withdraw all funds (contributions, bonus, and growth) completely tax-free from the age of 60, with no penalty. This makes it a useful retirement savings vehicle.
Yes. You can transfer a LISA between providers without triggering the withdrawal penalty, as long as you transfer the full balance to another LISA.
For first-time buyers planning to purchase within a few years, a LISA may be better than a pension (easier access for property). For long-term retirement saving, a pension with employer contributions is usually more advantageous.
£4,000 per year (maximum government bonus of £1,000/year). This counts towards your overall ISA annual allowance of £20,000.
Help to Buy ISAs closed to new applications in November 2019. If you have an existing H2B ISA, you can transfer it to a LISA, but the amount would count towards your LISA annual limit.
The withdrawal charge applies to the full market value at the time of withdrawal, including investment gains (and losses). If the market has fallen, you may receive less than your contributions.