Answers · UK 2025/26
What is the LISA withdrawal penalty UK?
The Lifetime ISA early-withdrawal penalty is 25% of the amount withdrawn — applied to your contributions plus the 25% government bonus plus any growth. The penalty effectively claws back the bonus and takes around 6.25% of your own money on top. No penalty applies for buying a first home up to £450,000, reaching age 60, or terminal illness.
Full answer
Mechanics: pay £4,000 into a LISA, government adds £1,000 bonus = £5,000. Withdraw early for a non-qualifying reason and 25% × £5,000 = £1,250 penalty applies, returning only £3,750 — £250 less than the £4,000 you paid in. That is the punitive feature of LISA: the 25% penalty is bigger than the 20% bonus reversal, so you lose around 6.25% of your own contributions. Qualifying penalty-free withdrawals: (1) buying your first home up to £450,000 (must be a residential mortgage, completed at least 12 months after first LISA contribution); (2) age 60 or over; (3) terminal illness with under 12 months’ life expectancy. The £450,000 property cap has not changed since 2017 despite house-price growth — many London FTBs now find their LISA stranded. Useful workaround: at age 50 LISA contributions stop earning the bonus, but at 60 the funds become accessible penalty-free. Always model the 25% charge before transferring a Help-to-Buy ISA into a LISA.
Try the calculator
Related guides
More answers
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.