Thousands of individuals who saved into a Lifetime ISA (LISA) were subjected to multiple withdrawal penalties within a single tax year. Data from an FOI request by financial app Plum to HMRC indicates that approximately 45,000 savers faced penalties for unauthorised withdrawals from LISAs in the 2024/25 tax year.
Savers who were penalised more than once lost an average of around £760. Of these, 33,530 incurred fines up to £999, while nearly 4,000 faced fines exceeding £2,000. Sixty individuals were charged over £8,000.
The LISA, introduced in April 2017, allows individuals aged 18 to 40 to save up to £4,000 tax-free annually for a first home or retirement. However, the product's property price cap has remained at £450,000 since its launch, despite rising house prices. Purchasing a home above this cap results in an unauthorised withdrawal penalty of 25 per cent on the total amount withdrawn.
Plans for a replacement product, the First Time Buyer ISA, were outlined in former chancellor Rachel Reeves’ 2025 Autumn Budget and confirmed in a Treasury consultation in June. This new product is expected to remove the retirement option, add the bonus only at the point of property purchase, and eliminate cash withdrawal penalties. It will also have no upper age limit.