Lifetime ISA
Lifetime ISA withdrawal penalty: what the 25 % charge takes
Enter what you paid in yourself and the cash you need. The tool applies the charge to the whole amount withdrawn, bonus included, and grosses up the withdrawal so the sum left in hand is the one you asked for.
What leaving a Lifetime ISA early costs
Lost if you take it all out
£750
| Pot with bonus (no growth) | £15,000 |
| You would get back | £11,250 |
| To have £5,000 in hand, withdraw | £6,667 |
| Share of your own money lost | 6.25 % |
No charge at 60 or over, for a first home of £450,000 or less, or with less than 12 months to live.
Money taken out of a Lifetime ISA before age 60, for anything other than a qualifying first home or terminal illness with less than 12 months to live, bears a withdrawal charge of 25 % of the amount withdrawn. The charge applies to the bonus and to any growth as well as to your own payments, so it removes more than the government added. GOV.UK gives the case of £800 of savings that earns a £200 bonus: the pot of £1,000 loses £250 and £750 comes back, £50 less than was paid in. That is a loss of 6.25 % of your own money before growth. For a partial withdrawal the charge is taken from the amount you ask for, so to receive £120 you withdraw £160. Transferring the account to another type of ISA before 60 is charged in the same way.
Sums checked by Radif Partners · Editorial policy · How the sums are done
The charge on a full withdrawal
When everything is taken out, the 25 % applies to the total in the account, including the government bonus (GOV.UK, withdrawing money from your Lifetime ISA). Without growth, the outcome is always the same share of your own money, whatever the size of the pot.
| Your payments | Pot with bonus | Charge | You receive | Below your payments |
|---|---|---|---|---|
| £1,000 | £1,250 | £313 | £938 | £63 |
| £4,000 | £5,000 | £1,250 | £3,750 | £250 |
| £8,000 | £10,000 | £2,500 | £7,500 | £500 |
| £12,000 | £15,000 | £3,750 | £11,250 | £750 |
| £20,000 | £25,000 | £6,250 | £18,750 | £1,250 |
The last column grows in step with the pot: £12,000 of savings, three years of full payments, leaves the saver £750 short. That shortfall is the real price of leaving, on top of the bonus that disappears.
Getting a set amount in hand
A partial withdrawal is charged on the sum taken out, so the account must release more than the cash you need. Dividing the target by 0.75 gives the gross withdrawal. GOV.UK uses £160 to raise £120; the same arithmetic gives these figures.
| Cash needed | Withdraw | Charge |
|---|---|---|
| £120 | £160.00 | £40.00 |
| £1,000 | £1,333.33 | £333.33 |
| £2,500 | £3,333.33 | £833.33 |
| £5,000 | £6,666.67 | £1,666.67 |
| £10,000 | £13,333.33 | £3,333.33 |
Take a saver who has paid in £12,000 over three years and holds £15,000 with the bonus. To have £5,000 in hand, the account has to release £6,667, of which £1,667 goes in the charge. The other £8,333 stays in the Lifetime ISA, still carrying its bonus and still free of the charge if it is later used for a qualifying home or kept until 60. A partial withdrawal therefore limits the loss to the money actually taken, which the calculator above shows line by line.
Growth changes the result
Interest or investment growth is also inside the pot, so it is charged too, but it can offset the loss. The table follows three years of £4,000 payments from age 30 and a full withdrawal at the end.
| Growth a year | Own payments | Pot | You receive | Gain or loss |
|---|---|---|---|---|
| 0 % | £12,000 | £15,000 | £11,250 | -£750 |
| 2 % | £12,000 | £15,608 | £11,706 | -£294 |
| 4 % | £12,000 | £16,232 | £12,174 | £174 |
With no growth or with losses, the saver always ends up behind; with steady growth over several years, the charge can leave them roughly level with what they paid in, but the bonus is gone either way. That contrast is what separates a Lifetime ISA from an ordinary cash ISA, which can be emptied at any time without a charge. In a Lifetime ISA the money is free of the charge only for a first home, from age 60 or in terminal illness.
When no charge applies
Three situations release the money freely: buying a first home for £450,000 or less, at least 12 months after the first payment, through a conveyancer and with a mortgage; reaching 60; and terminal illness with less than 12 months to live. The home conditions are set out on the house price limit page. Moving the account to a cash or stocks and shares ISA before 60 counts as a withdrawal, and so does a transfer to a Help to Buy ISA. The main Lifetime ISA page shows what the pot reaches if it stays put, and the GOV.UK Lifetime ISA guide lists the conditions of the account.