HMRC Data Shows 45,000 Savers Hit by Lifetime Isa Penalties
HM Revenue and Customs data reveals thousands of Lifetime Isa savers lost significant funds through unauthorized withdrawal charges during the 2024-25 tax year.
Data from HM Revenue and Customs reveals that approximately 45,000 Lifetime Isa savers incurred unauthorized withdrawal charges multiple times during the 2024-25 tax year. The figures, obtained by the money app Plum through a freedom of information request, show that savers penalized more than once lost an average of £760, while some faced cumulative penalties exceeding £8,000. The top 25 cumulative penalties averaged £11,000.
Lifetime Isas offer a 25% government bonus for retirement or first-time home purchases but impose a 25% charge for unauthorized withdrawals, such as those made by individuals under 60 not buying a home. Critics argue these rules are overly restrictive because the penalty can claw back the government bonus and a portion of the saver's own capital.
In response to these issues, the government closed a consultation in August 2026 for a new first-time buyer Isa. This new product is intended to replace the Lifetime Isa to better support individuals attempting to enter the housing market.
