Answers · UK 2025/26
What is the Lifetime ISA withdrawal penalty?
Non-qualifying Lifetime ISA withdrawals are charged 25%, which removes the government bonus plus around 6.25% of your own money. Qualifying use is a first home up to £450,000 or withdrawal after age 60.
Full answer
If you withdraw from a Lifetime ISA for any reason other than buying your first home (up to £450,000), after age 60, or terminal illness, HMRC charges a 25% withdrawal penalty on the amount taken out. The maths: pay in £4,000, get £1,000 government bonus, total £5,000. Withdraw early and 25% × £5,000 = £1,250 penalty. You receive £3,750 — £250 less than you originally paid in. This effectively claws back the bonus (£1,000) plus about 6.25% of your own contribution. The penalty was temporarily reduced to 20% during 2020–2021 due to COVID; it has since returned to 25%. Death and terminal illness withdrawals avoid the penalty entirely. The LISA must be open for at least 12 months before any qualifying withdrawal.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.