Thousands of Lifetime ISA (LISA) savers were hit with withdrawal penalties of up to £11,000 in the last tax year, new figures show. Data from HM Revenue and Customs (HMRC) reveals that around 45,000 LISA savers were penalised with unauthorised withdrawal charges more than once in 2024/25.
The figures were obtained by the money app Plum through a Freedom of Information (FOI) request. LISAs allow people to save for a first home or retirement, with an annual Government bonus of 25% up to a maximum of £1,000. However, a 25% charge may apply to unauthorised withdrawals, such as when someone is under 60 and not buying a first home, or if the property costs more than £450,000.
Average penalties and charge brackets
The average saver penalised more than once in 2024/25 lost around £760 that year. Around 60 savers faced charges totalling £8,000 or more, while another 60 incurred charges of £7,000 to £7,999. The most common charge bracket among those hit with multiple charges was up to £999, affecting around 33,530 savers.
Asked by Plum about the average of the top 25 cumulative penalties for individuals penalised more than once within the same tax year, HMRC said this was £11,000 in 2024/25, rounded to the nearest £100.
Wider impact and future of LISA
According to HMRC, 154,100 people made unauthorised withdrawals in 2025/26, totalling £118,985,000 in charges. The average withdrawal value for a house purchase was £15,407.
LISAs launched in 2017, but the Government launched a consultation on a new first-time buyer ISA in August. The new product will focus on first-time homebuyers rather than retirees, and will replace the LISA when available. Until then, savers can still open a LISA and continue saving into existing accounts.
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." He added: "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% 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."
