What Happens If You Take Money Out of a Lifetime ISA?

Taking money out of a Lifetime ISA for a reason other than a first home, being 60 or over, or terminal illness attracts a withdrawal charge of 25%, according to gov.uk. For the whole pot the charge applies to the total including the bonus, so the amount received can be less than was paid in. This guide uses assumed figures for the 2026-27 tax year to show the cost.

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.

What are the charge-free reasons for withdrawing?

gov.uk lists three situations where money can be withdrawn from a Lifetime ISA without the charge: buying a first home, being 60 or over, and being terminally ill with less than 12 months to live (withdrawing money from your Lifetime ISA). Any other withdrawal attracts the 25% charge.

For context, gov.uk says the government adds a 25% bonus to savings, up to a maximum of £1,000 per year, on payments of up to £4,000 a year until you are 50, and that you must be 18 or over but under 40 to open one (GOV.UK Lifetime ISA overview).

What does a withdrawal charge cost in numbers?

gov.uk says that if the whole pot is withdrawn, the charge applies to the total amount in the ISA, including the government bonus. The figures below are assumptions for the arithmetic.

• Paid in: £5,600. Bonus at 25%: £1,400. Total in the account: £7,000.
• Charge at 25% of £7,000: £1,750.
• Amount received: £7,000 less £1,750 = £5,250.
• Compared with the £5,600 paid in, that is £350 less.

The charge takes back the bonus and a further part of the money paid in. The Lifetime ISA calculator can show the cost for other amounts, and its results are illustrations, not forecasts.

How do the first-home conditions affect timing?

gov.uk says a first-home purchase qualifies if the property costs £450,000 or less, you buy at least 12 months after your first payment into the Lifetime ISA, a conveyancer or solicitor acts for you, and you are buying with a mortgage. The ISA provider pays the funds directly to the conveyancer or solicitor, so the buyer cannot withdraw the cash and hand it over. gov.uk also says the savings cannot be used if the private mortgage comes from a relative or certain connected people.

The 12-month period is counted from the first payment into the account. A purchase planned inside that period does not meet the condition, so using the funds for it would attract the charge. If you are buying with a partner who also has a Lifetime ISA, gov.uk says you can both use your savings and bonus provided you are both first-time buyers and meet all the conditions. If you also hold a Help to Buy ISA, you can only use the bonus from one of them.

The pages read do not mention buy-to-let, whether the buyer must live in the property, or what happens if the purchase falls through, so ask the provider and conveyancer about those.

What changes at 60?

From 60, gov.uk lists withdrawal without the charge as available. gov.uk also says that moving a Lifetime ISA to another type of ISA before 60 triggers the 25% charge. The pages read do not compare the Lifetime ISA with a pension, so how the two fit together is a question for a pension provider or a regulated adviser.

Does timing around the bonus matter?

The pages read do not say when the bonus is credited, so whether a provider has credited a payment's bonus before a withdrawal starts is a question for the provider. The Lifetime ISA limit applies to each tax year, which runs from 6 April to 5 April, so the point in the year at which a payment is made can affect how long the bonus is held in the account. Ask the provider for its bonus payment schedule, especially for a stocks and shares account where timing may differ.

How does a Lifetime ISA compare with other ISAs on access?

gov.uk says that for ISAs generally you can take your money out at any time without losing any tax benefits, and that there are different rules for a Lifetime ISA (withdrawing your money). It also says that with a flexible ISA you can take out cash and put it back in the same tax year without reducing that year's allowance, and that your provider can confirm whether an ISA is flexible. As an assumed example, if £2,000 is withdrawn from a flexible ISA after payments earlier in the year, the £2,000 can go back in without using more of the £20,000 allowance. The gov.uk page describes that arrangement for ISAs generally, not for the Lifetime ISA.

For money that may be needed at short notice, the access terms of each account are worth checking first. The ISA calculator shows how different ISA types might grow, and the Advanced ISA Planner models several accounts over several years, both as illustrations.

What is not guaranteed?

• Investment value. A stocks and shares Lifetime ISA can fall in value, and the bonus does not protect against that. The pot could be worth less than was paid in, especially over short periods.
• The property limit. The £450,000 limit is set by the government and could be revised. If property prices rise above it, the Lifetime ISA would not meet the first-home conditions for that purchase.
• The rules. The charge, the bonus and the limits can change, so an approach built on today's rules is worth rechecking against gov.uk.
• Cover. The pages read do not say whether a given account is covered by the FSCS.

What are the common pitfalls?

• Buying less than 12 months after the first payment.
• Assuming the charge only removes the bonus. The worked example shows it can leave less than was paid in.
• Not asking the conveyancer and provider how the funds are released, and how long it takes.
• Not asking about the provider's bonus payment schedule.

What to check before a withdrawal

1. Does the reason match a charge-free situation?
2. Has it been 12 months since the first payment, if the money is for a home?
3. Is the property at or under the £450,000 limit?
4. How does the provider's withdrawal process work, and how long does it take?
5. What would the charge cost on the actual balance?
6. If the rules matter to a decision, what does the current gov.uk page say?

Frequently asked questions

Can a Lifetime ISA be used as an emergency fund?

A withdrawal outside the three charge-free situations attracts a 25% charge, which can leave less than was paid in. gov.uk says that ISAs generally allow withdrawals at any time without losing tax benefits, and that a Lifetime ISA has different rules.

Is a Lifetime ISA flexible like a flexible ISA?

gov.uk describes flexible ISAs as letting you put back cash taken out in the same tax year. It does not describe that for the Lifetime ISA, so ask the provider before assuming it.

Can I use a Lifetime ISA for a buy-to-let?

The gov.uk page on withdrawing money lists first-home conditions and does not mention buy-to-let or whether the buyer must live in the property. Ask the provider and conveyancer about a particular purchase.

How can I check what an early withdrawal would cost?

Work out the total in the account, including the bonus, then take 25% of it. In the example above, £7,000 gives a charge of £1,750 and £5,250 received.

---

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.