Lifetime ISA withdrawal charges hit 45,000 savers more than once in 2024/25
About 45,000 Lifetime ISA savers paid withdrawal charges more than once in 2024/25, losing about £760 on average, HMRC figures obtained by Plum show. Savers can keep opening the old account, 25% charge included, until a Treasury replacement arrives on a date not yet set.
The Board Room · Leadership desk
What happened
- About 33,530 of them paid up to £999 in total charges over the year, the most common bracket among repeat payers.
- HMRC said the 25 largest cumulative penalties among people charged more than once averaged £11,000 in 2024/25.
- The charge takes 25% of the whole sum withdrawn, bonus and own money alike, so a £1,250 pot built from £1,000 of savings falls to £937.50.
- Providers want the £450,000 house-price cap, unchanged since the account launched in 2017, made regional, and Plum wants it raised to about £600,000.
Why it matters
- What it costs cost Repeat payers lost about £34m between them in 2024/25 on HMRC's rounded figures, and part of it came out of their own contributions as well as the government bonus.
- Who has to decide decision The Treasury's consultation response sets the new product's rules; whether current Lifetime ISA holders get penalty relief before any launch is the separate decision that follows.
- What it limits constraint The repeat-penalty data supports changing the cash charge; the choice between a regional cap and a £600,000 limit has to be made on house-price evidence.
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Repeated charges of that size point to small sums taken out more than once. Average losses of £760 at the 25% rate imply about £3,040 withdrawn per person over the year [26]. The average withdrawal for a house purchase was £15,407 in 2025-26 [16], so the repeat group drew about a fifth of a typical deposit, on figures from two different years [27]. A charge falls on an unauthorised withdrawal, for example when a holder under 60 takes money out for anything other than a first home [10]. HMRC's response, as reported, does not break the charges down by reason [4].
A 25% charge on a pot that includes a 25% bonus takes back more than the bonus [9]. In City AM's worked example, a saver who paid in £1,000 ends up £62.50 short of their own contribution [23]. Maike Currie, vice president of personal finance at PensionBee, said: "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." [14] Rajan Lakhani of Plum, the app that obtained the figures, said: "These are significant sums of money for first-time buyers who already face considerable obstacles to getting a foot on the housing ladder." [15]
The replacement, as described so far, changes when the bonus arrives. It is expected to add the bonus only when a saver is ready to buy, and to drop both the retirement option and the upper age limit [12]. A pot with no bonus in it before purchase leaves nothing for an early-withdrawal charge to recover. City AM reported that the new product will also eliminate cash withdrawal penalties, which it said many would-be buyers may have felt they needed to cover day-to-day living costs [13]. The government has conceded the Lifetime ISA is "not working well for many" and "putting off some savers" [19].
Moneybox argues against replacing the account at all [21]. "We should not replace a product that is already helping people buy a home with a new first-time buyer ISA," Brian Byrnes of Moneybox said [20]. He said fixes to the penalty and the house-price cap "can be made now for the people already relying on it", and that those people should not "have to wait until 2028" for them [20]. In my view the HMRC figures support his point on timing more than his opposition to a new product. Holding the bonus back until purchase removes the clawback, where a smaller penalty on the old account would only shrink it [12]. Account holders can also keep saving into Lifetime ISAs after the replacement becomes available [3].
More people are being caught [25]. HMRC recorded £118,985,000 in Lifetime ISA withdrawal charges in 2025-26, from 154,100 people who made unauthorised withdrawals [17]. That is about £772 per person [24]. The headcount is about 19% higher than the 129,200 penalised in 2024/25, though the two figures come from separate HMRC releases and slightly different measures [25]. The consultation on the new ISA's design closed in August 2026 [2].
What to watch
- The Treasury's response to the first-time buyer ISA consultation, including any launch date and any change to the existing Lifetime ISA charge.
- HMRC's 2026-27 figures on unauthorised withdrawals, to see whether the headcount keeps rising.
- Any HMRC breakdown of charges by reason, showing how many came from purchases above the £450,000 cap.
Clarity's read
What the record supports and how the coverage leans. The claims behind it follow.
Reality
- Evidence72
- Adoption
- Not scored
- Hype gap+15
- Incentives70
- Confidence68
Claim ledger
Ranked by verification strength, evidence, and original report placement.
- [1]
The new product has yet to be given an official launch date by the government.
- [2]
A government consultation seeking views on the design and implementation of a new first-time buyer ISA closed in August 2026.
- [3]
It is still possible to open a Lifetime ISA until the new product becomes available and, beyond that, account holders can keep saving into Lifetime ISAs.
- [4]
Around 45,000 Lifetime ISA savers were hit with unauthorised withdrawal charges more than once in 2024-25, according to HMRC figures obtained by money app Plum through a freedom of information request; the figure was rounded to the nearest 100.
- [5]
HMRC's response showed the average saver penalised more than once in 2024-25 lost around £760 that year.
- [6]
Savers who suffered multiple Lifetime ISA penalties accounted for around a third of the 129,200 people penalised in the 2024/25 tax year.
- [7]
The most common charge bracket among those charged multiple times was up to £999, with around 33,530 savers in it.
- [8]
HMRC said the average of the top 25 cumulative penalties per individual penalised more than once in the same tax year was £11,000 in 2024-25, rounded to the nearest £100.
- [9]
Lifetime ISA holders face a 25% penalty on the total withdrawn, including the government bonus and their own money. A saver putting in £1,000 gets a 25% bonus for a £1,250 pot; withdrawing the £1,250 loses £312.50, leaving £937.50.
- [10]
A 25% charge can apply on an unauthorised withdrawal, which may happen where someone is aged under 60 and not withdrawing the money for their first home.
- [11]
The Lifetime ISA launched in April 2017, and its property price cap has been frozen at £450,000 since its introduction.
- [12]
The new first-time buyer product is expected to remove the option of using funds for retirement, add the bonus only when a saver is ready to purchase a property, and have no upper age limit.
- [13]
The new product will also eliminate cash withdrawal penalties, which City AM said many would-be first-time buyers may have felt necessary to cover day-to-day living expenses.
- [14]
"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."
- [15]
"These are significant sums of money for first-time buyers who already face considerable obstacles to getting a foot on the housing ladder."
- [16]
The average Lifetime ISA withdrawal value for a house purchase was £15,407 in the 2025-26 tax year.
- [17]
HMRC figures released in September show £118,985,000 in Lifetime ISA withdrawal charges recorded in 2025-26, and 154,100 people made unauthorised withdrawals that year.
- [18]
Providers are urging the government to replace the national cap with a regional one, while others including Plum have called for the national limit to be raised to roughly £600,000.
- [19]
The government conceded the Lifetime ISA was "not working well for many" and "putting off some savers".
- [20]
Brian Byrnes of Moneybox said: "The Lifetime ISA...needs targeted improvements, including to the withdrawal penalty and house-price cap, but these changes can be made now for the people already relying on it" and "We should not replace a product that is already helping people buy a home with a new first-time buyer ISA. Nor should people already relying on the Lifetime ISA have to wait until 2028 for much-need improvements to the product."
- [21]
Some firms have argued the Lifetime ISA should not be replaced, calling instead for improvements to the existing product and arguing the shake-up will add complexity.
- [22]
Savers penalised more than once lost about £34m between them in 2024/25.
- [23]
In the worked example, the saver ends £62.50 below their own £1,000 contribution.
- [24]
Lifetime ISA withdrawal charges in 2025-26 averaged about £772 per person making an unauthorised withdrawal.
- [25]
The 154,100 people making unauthorised withdrawals in 2025-26 is about 19% more than the 129,200 penalised in 2024/25, on figures from separate releases.
- [26]
An average loss of £760 at the 25% charge rate implies about £3,040 withdrawn per repeat payer over the year.
- [27]
The implied £3,040 withdrawn by repeat payers is about a fifth of the £15,407 average house-purchase withdrawal (figures from different tax years).
Sources
2 independent publishers whose own reporting we read for this story.
- cityam.comThousands of Lifetime ISA savers slammed with multiple withdrawal penalties
1 article · October 8, 2026
- independent.co.uk45,000 Lifetime Isa savers hit more than once in a year with withdrawal charges
1 article · October 7, 2026
Topics and entities
Topics
- First-time buyer housing finance
- UK savings and ISAs
Entities
- First-time buyer ISA
- HM Treasury
- HM Revenue and Customs