Answers · UK 2025/26

What happens if I withdraw from a Lifetime ISA before age 60?

Withdrawing from a Lifetime ISA for any reason other than buying your first home (up to £450,000) or after age 60 triggers a 25% government withdrawal charge, which effectively claws back more than just the 25% bonus you received -- meaning you can end up with less than you originally paid in. Withdrawals due to terminal illness are exempt from the charge.

Last updated: 2 July 2026Last reviewed: 2 July 2026How we verify

Full answer

The Lifetime ISA offers a generous 25% government bonus on contributions, but the withdrawal charge for using the money outside the permitted circumstances is a significant catch that can leave savers worse off than if they had never opened the account. **The 25% withdrawal charge explained** If you withdraw funds from a Lifetime ISA for any reason other than a qualifying first home purchase (up to £450,000), reaching age 60, or in the event of terminal illness, a 25% charge applies to the AMOUNT WITHDRAWN, not just to the bonus received -- this is a crucial distinction, since 25% of the withdrawal is actually a larger amount than the 25% bonus originally added, meaning you effectively lose some of your own original contribution too. **Why the maths works against you** If you contribute £1,000 and receive a £250 bonus (25% of your contribution), your account holds £1,250. Withdrawing this early triggers a 25% charge on the £1,250 withdrawal = £312.50, leaving you with £937.50 -- less than your original £1,000 contribution, even though you also received the bonus. **Qualifying uses avoid the charge** The charge does not apply if you withdraw to buy your first home (provided the property costs £450,000 or less, and you have held the LISA for at least 12 months before using it for this purpose), if you are aged 60 or over, or if you are terminally ill with a life expectancy of less than 12 months. **The £450,000 property price cap** A specific and sometimes-overlooked restriction is that a Lifetime ISA can only be used toward a first home purchase up to £450,000 -- this cap has not risen with house price inflation in many areas, meaning some first-time buyers in higher-priced regions may find their LISA cannot be used penalty-free if their property exceeds this threshold. **Worked example** Someone saves £4,000 a year into a Lifetime ISA for three years, receiving the maximum £1,000 annual bonus each year, building a total pot of £15,000 (£12,000 contributions plus £3,000 in bonuses, ignoring any investment growth). If they then need to withdraw the money for a purpose other than a qualifying first home purchase or reaching 60, the 25% charge on the full £15,000 withdrawal would be £3,750, leaving them with £11,250 -- less than their original £12,000 of contributions. **When it makes most sense** A Lifetime ISA is most valuable for those confident they will use the funds for a genuine first home purchase within the £450,000 cap, or those using it purely as a long-term retirement savings vehicle they do not expect to touch before age 60 -- it is generally unsuitable as a general-purpose or emergency savings account given the harsh early withdrawal charge. **Practical tip** Only contribute to a Lifetime ISA money you are genuinely confident you will use either for a qualifying first home purchase or will leave untouched until age 60, and keep a separate, more accessible emergency fund elsewhere, since the 25% withdrawal charge makes the Lifetime ISA a poor choice for money you might need access to unexpectedly.