HMRC DATA SHOWS LIFETIME ISA SAVERS FACE REPEAT CHARGES

Around 45,000 people with Lifetime ISAs were hit with unauthorised withdrawal charges more than once during the 2024-25 tax year, according to HM Revenue and Customs figures obtained by the savings app Plum under a freedom of information request. HMRC said the average saver penalised more than once in that period lost around £760 over the year. The figures, rounded to the nearest 100, relate to withdrawals that breached the scheme's conditions. Lifetime ISAs let savers put money aside for a first home or retirement while receiving a government bonus on their contributions.

The government adds a 25% bonus to Lifetime ISA savings, up to £1,000 a year, but applies a 25% charge on unauthorised withdrawals, which can arise when a saver is under 60 and not using the money to buy a first home. HMRC's figures showed around 60 savers faced cumulative charges of £8,000 or more in 2024-25, with a further 60 incurring charges of £7,000 to £7,999. The most common bracket was charges of up to £999, affecting around 33,530 savers. HMRC told Plum that the average of the top 25 cumulative penalties for repeatedly penalised savers was £11,000 in 2024-25.

The rules governing Lifetime ISAs have faced criticism for being overly restrictive, including a requirement that a first home cost no more than £450,000. Separate HMRC figures released in September showed £118,985,000 in withdrawal charges was recorded for Lifetime ISAs in the 2025-26 tax year, with 154,100 people making unauthorised withdrawals. The average withdrawal value for a house purchase that year was £15,407, HMRC said. Lifetime ISAs were launched in 2017 to help people save for a first home or retirement.