HMRC said some penalties hit £11,000. (Image: Getty)
Thousands of Lifetime ISA (LISA) savers were hit with withdrawal penalties of up to £11,000 in the last tax year, new figures show. According to the data from HM Revenue and Customs (HMRC), around 45,000 LISA savers were penalised with unauthorised withdrawal charges more than once in 2024/25. The figure was obtained by the money app Plum through a Freedom of Information (FOI) request. LISAs enable people to save for their first home or retirement, and the pots receive an annual Government bonus of 25%, up to a maximum of £1,000.
However, a 25% charge may apply if someone makes an unauthorised withdrawal. This can happen when someone is aged under 60 and not withdrawing the money for their first home. Savers also face a charge if they use the money for a house worth more than £450,000.
The numbers show the average saver who was penalised more than once in 2024/25 lost around £760 that year. Around 60 savers faced charges totalling £8,000-plus in the tax year 2024/25, while around 60 others incurred charges of £7,000 to £7,999. The most common charge bracket, among those hit with multiple charges, was for amounts of up to £999. Around 33,530 savers were in this bracket.
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.
The LISA rules have previously been slammed as too restrictive, with critics often citing the 25% exit penalty. Far more people have been forced to pay these penalties in recent times due to emergencies or changing plans.
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 enable people to save for their first home or their retirement. (Image: Getty)
LISAs launched in 2017, but the Government launched a consultation seeking views on a new first-time buyer ISA in August. The new product will be focused on first-time homebuyers rather than retirees.
When it’s available, it will replace the LISA. However, it is still possible to open a LISA until the new product comes out, and, beyond that, account holders can keep saving into LISAs.
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.”
HMRC said 154,100 people made unauthorised withdrawals in 2025/26. (Image: Getty)
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.”
