Taking money out of a Lifetime ISA for any reason other than a first home, reaching 60 or terminal illness costs 25% of the amount withdrawn, which wipes out the government bonus and about 6.25% of your own payments. From 29 October 2026 the charge is 20% when the money buys a first home costing more than £450,000. A first home at £450,000 or less carries no charge.
An unauthorised withdrawal: the 25% charge applies to the whole amount, bonus and growth included.
Lifetime ISA withdrawal charges at a glance
| Reason for the withdrawal | Charge | £1,000 pot pays out |
|---|---|---|
| First home, £450,000 or less | 0% | £1,000 |
| Aged 60 or over | 0% | £1,000 |
| Terminally ill, under 12 months to live | 0% | £1,000 |
| First home over £450,000 (from 29 October 2026) | 20% | £800 |
| Any other reason | 25% | £750 |
How the Lifetime ISA withdrawal charge works
A Lifetime ISA is open to people aged 18 to 39. You can pay in up to £4,000 a year until you turn 50, and the government adds a 25% bonus of up to £1,000 a year. The £4,000 counts towards your £20,000 annual ISA allowance for 2026/27 (GOV.UK: Lifetime ISA and who can open one, checked 1 November 2026).
You can take money out without a charge to buy your first home, from age 60, or if you are terminally ill with less than 12 months to live. Any other withdrawal, including a transfer to another type of ISA before 60, carries a 25% charge on the whole amount you take out (GOV.UK: Withdrawing money from your Lifetime ISA, checked 1 November 2026).
Why 25% costs more than the bonus
The bonus is 25% of what you pay in, but the charge is 25% of the larger figure that includes the bonus. Paying in £100 earns £25 of bonus, a £125 pot. A 25% charge on £125 is £31.25, so £93.75 comes back: the whole bonus and £6.25 of your own money. The 20% rate for homes over £450,000 is set so that, with no growth, the charge takes back the bonus and nothing more: 20% of £125 is £25.
Getting a set amount of cash
To end up with a set sum after a 25% charge, you need to take out a third more than that sum. Choose the second option in the calculator to work it out.
Lifetime ISA withdrawal penalty examples
Each example was run through the calculator above with the inputs shown.
Closing a small pot early
Someone paid in £800, the government added a £200 bonus, and the pot is £1,000 with no growth. Withdrawing all of it for a reason that does not qualify costs a £250 charge, so £750 comes back: £50 less than they paid in. This is the example GOV.UK uses.
Needing £120 for a bill
To have £120 in hand after the 25% charge, the withdrawal has to be £160. The charge on £160 is £40, which leaves the £120 needed.
A first home costing £480,000
A buyer paid in £16,000 over four years and received £4,000 in bonuses, a £20,000 pot. The home costs more than £450,000, so from 29 October 2026 the charge is 20%: £4,000. They get £16,000 towards the purchase, exactly what they paid in. Under the old 25% rate they would have received £15,000.
A pot that has grown
£16,000 paid in, £4,000 of bonus and £5,000 of investment growth make £25,000. Cashing it in for a reason that does not qualify costs £6,250, because the charge also applies to the growth. They receive £18,750, still £2,750 more than they paid in.
Rules that change the answer
First home conditions
A first-home withdrawal is free of the charge only if all of these apply: you buy at least 12 months after your first payment in, a conveyancer or solicitor acts for you and receives the money from the ISA provider, and you buy with a mortgage. The mortgage cannot be a private loan from a relative or your spouse or civil partner. If you buy with someone who also has a Lifetime ISA, you can both use your savings and bonus as long as you are both first-time buyers (GOV.UK, checked 1 November 2026).
The Budget 2026 change
Budget 2026 cut the charge for first homes above the £450,000 cap from 25% to 20% from 29 October 2026; other unauthorised withdrawals stay at 25%. The Budget also announced a First Time Buyer ISA from April 2029, with a 25% bonus on the final balance up to £20,000 towards a first home worth up to £450,000. It replaces the Lifetime ISA for new savers, and existing Lifetime ISAs carry on under the current rules (HMRC: Budget 2026 overview of tax legislation, paragraphs 2.3 and 2.4, checked 1 November 2026).
After 50 and on death
From your 50th birthday you cannot pay in or earn the bonus, but the account stays open and keeps earning interest or returns. If you die, the Lifetime ISA ends on the date of death and there is no charge on the money in it.
Common mistakes
Assuming you only lose the bonus. At 25% you also lose 6.25% of your own payments, plus a quarter of any growth.
Withdrawing exactly what you need. The charge comes off the amount withdrawn, so ask for a third more than the cash you need.
Transferring to a cash ISA before 60. That counts as an unauthorised withdrawal and carries the 25% charge.
How this calculator works: it applies the charge rate for the reason you choose to the amount withdrawn, or grosses up the cash you need by dividing by one minus the rate, and compares the result with your own payments in. The rules were checked against GOV.UK and the Budget 2026 overview on 1 November 2026. Every source is listed on our methodology page.