Lifetime ISA savers have been repeatedly stung with withdrawal penalties, with some losing thousands of pounds, according to figures obtained by HMRC from the money app Plum. Tens of thousands of savers have faced charges when withdrawing cash before age 60 for reasons other than buying a home or saving for later in life.
The data shows that around 45,000 Lifetime ISA savers were charged penalties during the 2024-25 tax year, while separate figures revealed that Lifetime ISA savers paid almost £119 million in withdrawal penalties in 2025-26. Those who faced penalties lost an average of £760 over the year.
Penalty breakdown for repeated charges
Of the people charged more than once in the 2024-25 financial year, around 33,530 lost less than £1,000 in total penalties. However, approximately 60 people were charged more than £8,000, while another 60 lost between £7,000 and £7,999.
In 2025-26, the average amount withdrawn from a Lifetime ISA to buy a property was £15,407.
How Lifetime ISAs work
Lifetime ISAs are designed to help people save for their first home or for retirement. These accounts allow savers to deposit up to £4,000 each year, with the Government adding a 25% bonus worth up to £1,000 every year.
While penalties are enforced when people make early withdrawals, there are exceptions. For example, the penalties are waived if you're diagnosed with a terminal illness.
Experts call for reform
Rajan Lakhani, a personal finance expert at Plum, said: "What the data shows will anger many and focus minds on ensuring the new first-time buyer Isa is fit for purpose. These are significant sums of money for first-time buyers who already face considerable obstacles to getting a foot on the housing ladder."
Maike Currie, vice president of personal finance at PensionBee, said: "These figures expose a fundamental flaw in the Lifetime Isa. The Government gives you a 25 per cent bonus for saving, but if life gets in the way, the withdrawal charge can claw back the bonus and take a slice of your own savings too."
She pointed out that a record 87,250 Lifetime Isa holders used the product to purchase their first home in 2024-25, a 54 per cent annual increase, and argued the product needed repairing rather than replacing.
Cumulative penalties for savers charged more than once in 2024–25
- £0 – £999: 33,530
- £1,000 – £1,999: 7,470
- £2,000 – £2,99: 2,350
- £3,000 – £3,999: 820
- £4,000 – £4,999: 370
- £5,000 – £5,999: 200
- £6,000 – £6,999: 110
- £7,000 – £7,999: 60
- £8,000+: 60
