Last updated: April 2026 · Sourced from official UK government publications
Rules and figures drawn from HMRC and gov.uk. Not financial advice, see disclaimer below.
The Lifetime ISA comes with strict rules about when you can take your money out. Get it right and it’s tax-free. Get it wrong and a 25% withdrawal penalty can leave you with less than you put in. This guide explains every withdrawal scenario in plain English.
You can withdraw your entire LISA balance, contributions, government bonus, and any growth, tax-free for a first home purchase, provided the property costs £450,000 or less, you are a first-time buyer, you are buying with a mortgage, and the account has been open for at least 12 months. Your conveyancer requests the funds directly from the provider, you cannot withdraw the cash yourself and then use it.
If you’re buying jointly and both of you have LISAs, you can each use your own LISA on the same purchase, but both of you must be first-time buyers.
If you withdraw outside a permitted circumstance, HMRC applies a 25% charge to the total amount withdrawn, your contributions plus the government bonus. Because the penalty is calculated on the inflated total, you can receive back less than you originally paid in. For example, contributing £4,000, receiving a £1,000 bonus (total £5,000), then withdrawing early results in a £1,250 deduction, leaving just £3,750.
Example: You save £4,000. The 25% bonus adds £1,000. Total balance: £5,000. You withdraw early. The 25% penalty on £5,000 = £1,250. Amount returned: £3,750, that’s £250 less than the £4,000 you paid in. For a stocks-and-shares LISA with investment growth, the penalty base is even larger.
| Scenario | Amount | After the penalty calculation |
|---|---|---|
| Your contribution | £4,000 | , |
| Government bonus (25%) | £1,000 | , |
| Total LISA balance | £5,000 | , |
| Early withdrawal penalty (25% of £5,000) | , | −£1,250 deducted |
| Amount returned to you | , | £3,750 (£250 less than you paid in) |
The penalty rate was temporarily reduced to 20% during 2020–2021 (COVID relief), but has returned to 25%.
The only exception besides the qualifying home purchase and retirement access is terminal illness, in that case, you can withdraw everything penalty-free at any age.
Note: if your LISA provider goes into administration, FSCS protection covers up to £85,000.
You can withdraw your full LISA balance, contributions, bonuses, and any growth, tax-free from your 60th birthday, for any reason. This is a common source of confusion: the LISA retirement access age is 60, not 55. Workplace pensions can be accessed from 55 (rising to 57 in 2028), but the LISA has its own separate and higher age threshold.
From your 60th birthday, you can withdraw the full balance, contributions, bonuses, and any growth, tax-free, for any reason. You don’t need to be buying a home or retiring. You can take partial withdrawals or the full amount.
| Access Route | Age Requirement | Tax Treatment | Conditions |
|---|---|---|---|
| First home purchase | Open 12+ months | Tax-free | £450,000 limit; first-time buyer; mortgage required |
| Retirement | Age 60+ | Tax-free | Any reason; no further conditions |
| Terminal illness | Any age | Tax-free | Medical diagnosis required |
| Early withdrawal | Any age | 25% penalty applies | No qualifying reason |
“If you’re between 40 and 59 and need access to savings in an emergency, a LISA is not the right vehicle, the penalty is significant. A Cash ISA or easy-access savings account gives you flexibility without the cost.”
If you withdraw from a Lifetime ISA outside a permitted circumstance, HMRC applies a 25% withdrawal charge to the full amount taken out, including both your contributions and the government bonus. Because the charge is calculated on the combined total, it is possible to receive back less than you originally paid in. For example, contributing £1,000 and receiving a £250 bonus gives £1,250; the 25% charge on that is £312.50, leaving just £937.50.
There are three penalty-free withdrawal routes: purchasing a first home costing £450,000 or less (with a conveyancer submitting a formal claim to HMRC); reaching age 60 and closing or drawing down the account; or being diagnosed with a terminal illness with a life expectancy of less than 12 months. All other withdrawals are subject to the government's 25% withdrawal charge.
No. The penalty-free first home withdrawal route applies only where the property costs £450,000 or less. If the purchase price exceeds this threshold, the LISA funds cannot be used for that transaction without triggering the withdrawal charge. The £450,000 limit applies to the full property purchase price, regardless of how large a share the LISA covers.
If a LISA holder dies, the account can be closed and the full value, including the government bonus and any investment growth, passed to the estate without any withdrawal penalty being applied. The funds then form part of the estate and are distributed according to the will or, where there is no will, the rules of intestacy.
Yes, it is possible to withdraw from a LISA before age 60 for any reason, but outside the permitted circumstances the government's 25% withdrawal charge applies to the full amount taken out. There is no restriction on making the withdrawal itself, only a significant financial penalty. This makes the LISA unsuitable as a general emergency fund, particularly if accessed before a first property purchase.
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Subscribe free →Not financial advice. This guide explains LISA withdrawal rules based on HMRC rules as of April 2026. It is for information only and does not constitute personal financial advice. Individual circumstances vary, always check gov.uk/lifetime-isa for the latest rules.