Lifetime ISA Withdrawal Charge: Worked Examples
If money is taken out of a Lifetime ISA for a reason the rules do not treat as charge-free, a 25% withdrawal charge applies. gov.uk says that where the whole pot is withdrawn the charge applies to the total amount in the ISA, including the government bonus. The worked examples below assume the whole balance is withdrawn and use assumed figures (including assumed growth or falls in value) to show the arithmetic, so the person can receive less than they paid in.
The site's rules data was last checked against gov.uk on 26 September 2026. Figures typed in this guide may not yet reflect a later change, and the descriptions of gov.uk pages are summaries that may also lag. The current figures are on the ISA rules at a glance page. General information only, not financial advice.
How does the Lifetime ISA withdrawal charge work?
The government adds a bonus of 25% to money paid into a Lifetime ISA, and a withdrawal charge applies if money is taken out for a reason other than those gov.uk lists as charge-free. According to GOV.UK on withdrawing from a Lifetime ISA, the charge is 25%. The examples below assume the whole balance is withdrawn.
A point worth being clear on is what the charge is applied to. It is not 25% of the bonus alone. gov.uk says that where the whole pot is withdrawn it is 25% of the total amount in the ISA, including the government bonus. In the examples below that means the person's own payments, the bonus and any assumed growth together.
At the rates shown in this guide, a 25% charge on the combined total (payments plus bonus) is larger than the bonus itself, so it removes the bonus and also takes a slice of the person's own money. On the assumed figures below, if the account has earned no growth, or has lost value, the amount paid out is less than the amount paid in; that is this guide's own arithmetic, not a statement from gov.uk.
When is there no charge to take money out?
The charge is not applied in the following cases, as set out in the GOV.UK Lifetime ISA guide (the death case appears in the whole-guide version):
- Buying a first home. The property must cost £450,000 or less, the purchase must take place at least 12 months after the first payment into the account, and other conditions apply, including the use of a conveyancer or solicitor and the purchase being made with a mortgage.
- Age 60 or over. Money can be withdrawn from that age without the charge.
- Terminal illness. The person has less than 12 months to live.
- Death. gov.uk says that if the holder dies the Lifetime ISA ends on the date of death and there is no charge to withdraw the funds or assets.
Any other withdrawal is subject to the 25% charge. The full list of conditions for each case, and the detail of how a first-home withdrawal is handled, are in our guide to Lifetime ISA withdrawal rules.
How much is paid in, and how is the bonus calculated?
The government's rules set the bonus and the yearly limit. Payments into a Lifetime ISA count towards the yearly Lifetime ISA limit of £4,000, and gov.uk describes a bonus of 25% on what you save, up to a maximum of £1,000 a year. The GOV.UK Lifetime ISA page sets this out.
All the examples below start from the same assumed position:
- A person has paid in £2,800 of their own money in total.
- The bonus is 25% of that, which is £700 (£2,800 x 25%). This assumes all of the payments fell within the yearly limit.
- Growth is varied between examples.
These are illustrations using assumed figures. They are not forecasts, and the growth figures are assumed, not a prediction of what any account will earn. Investments can go down as well as up, and a cash account's interest rate depends on the provider.
Example 1: early withdrawal with no growth
In this example the account has earned nothing since the money went in, perhaps because it is newly opened.
| Step | Working | Amount |
|---|---|---|
| Own payments | assumed | £2,800 |
| Government bonus | £2,800 x 25% | £700 |
| Growth | assumed | £0 |
| Balance withdrawn | £2,800 + £700 + £0 | £3,500 |
| Withdrawal charge | £3,500 x 25% | £875 |
| Paid out | £3,500 - £875 | £2,625 |
| Compared with own payments | £2,625 - £2,800 | £175 less |
The person receives £2,625 from an account into which they paid £2,800. The charge of £875 is £175 more than the bonus of £700, which is why the payout is below the amount paid in.
Example 2: early withdrawal with some growth
Here the account has grown by an assumed £400 over the period, whether as interest or investment growth.
| Step | Working | Amount |
|---|---|---|
| Own payments | assumed | £2,800 |
| Government bonus | £2,800 x 25% | £700 |
| Growth | assumed | £400 |
| Balance withdrawn | £2,800 + £700 + £400 | £3,900 |
| Withdrawal charge | £3,900 x 25% | £975 |
| Paid out | £3,900 - £975 | £2,925 |
| Compared with own payments | £2,925 - £2,800 | £125 more |
With this assumed level of growth the payout is slightly above the amount paid in. On the assumed figures, £100 of the £400 growth is taken in the charge, and the charge on the whole balance still removes more than the bonus. Whether a person ends up with more or less than they paid in depends on how much growth there has been.
Example 3: early withdrawal after a fall in value
This example assumes the account is invested and has lost an assumed £400 in value. A fall like this is possible because the value of investments can go down as well as up.
| Step | Working | Amount |
|---|---|---|
| Own payments | assumed | £2,800 |
| Government bonus | £2,800 x 25% | £700 |
| Change in value | assumed | -£400 |
| Balance withdrawn | £2,800 + £700 - £400 | £3,100 |
| Withdrawal charge | £3,100 x 25% | £775 |
| Paid out | £3,100 - £775 | £2,325 |
| Compared with own payments | £2,325 - £2,800 | £475 less |
The person receives £2,325 after paying in £2,800. The fall in value and the charge combine, and the shortfall against the amount paid in is £475.
Example 4: the same balance with no charge
Now take the balance from Example 2, £3,900, and assume the withdrawal falls into one of the charge-free cases, such as the person being aged 60 or over.
| Step | Working | Amount |
|---|---|---|
| Balance withdrawn | as in Example 2 | £3,900 |
| Withdrawal charge | charge-free case | £0 |
| Paid out | £3,900 - £0 | £3,900 |
| Compared with own payments | £3,900 - £2,800 | £1,100 more |
The same balance produces a very different payout depending on the reason for the withdrawal. The difference between Example 2 and Example 4 is exactly the £975 charge.
What do the examples show?
Comparing the four tables:
- In these examples the whole balance is withdrawn, so the charge grows or shrinks with the balance.
- Where an account has no growth (Example 1) or has lost value (Example 3), the payout is below the amount paid in.
- Where growth is large enough (Example 2), the payout can be higher than the amount paid in, but it is still lower than the balance before the charge.
- Where no charge applies (Example 4), the full balance is paid out.
None of this predicts what a real account will do. To test different amounts, the Lifetime ISA calculator shows how payments and the bonus build up, and the ISA rules page lists the current figures. Our guide to Lifetime ISA withdrawal strategies sets out the options that exist in more detail, as information rather than a recommendation.
What to check with your provider
Practical details vary by provider, so it can help to ask:
- How is a withdrawal request made, and how is the charge shown on the statement?
- How long does a payout take, and does that differ for a first-home withdrawal?
- Is the account held as cash or invested, and if invested, when are investments sold to fund a withdrawal?
- Are there any provider fees on top of the government charge?
- What evidence is needed for a charge-free case such as terminal illness?
Frequently asked questions
Does the Lifetime ISA charge only take back the bonus?
No. Where the whole pot is withdrawn, gov.uk says the 25% charge applies to the total amount in the ISA, including the government bonus. At the rates shown in this guide, a 25% charge on the combined total is larger than the bonus.
Can I get back less than I paid in?
Yes. If the account has earned little or nothing, or has fallen in value, the 25% charge on the whole balance can leave a payout below the amount paid in. Example 1 and Example 3 show this with assumed figures; it is this guide's own arithmetic, not a statement from gov.uk.
Is the bonus paid on everything I pay in?
gov.uk describes a 25% bonus on what you save, up to a maximum of £1,000 a year, with payments in of up to £4,000 a year. The pages read do not say what happens to anything paid in above that limit, so ask your provider.
When is no charge applied?
According to GOV.UK, no charge applies when buying a first home within the price limit and the 12-month rule, from age 60, where the person has less than 12 months to live, or on death. Other withdrawals are charged.
This guide does not constitute financial advice. Your personal situation, tax position, and savings goals may mean different strategies are appropriate. Consider speaking to a regulated financial adviser if you are uncertain.
