Buying above £450,000? The Lifetime ISA withdrawal penalty has changed
The 30-second summary
From 29 October 2026, a qualifying first-time buyer purchasing a home above £450,000 can withdraw Lifetime ISA funds subject to a 20% charge rather than the previous 25%. Qualifying purchases at £450,000 or below can still be charge-free. Other unauthorised withdrawals generally remain subject to 25%.
- Effective for eligible withdrawals made from 29 October 2026.
- The £450,000 property limit has not increased.
- Other unauthorised withdrawals still normally face a 25% charge.
Applies to: UK Lifetime ISA rules for a qualifying first-home purchase.
Check original government sources
Example in numbers
Example: withdrawing £10,000 from a Lifetime ISA
- Old 25% charge: remaining
- £7,500
- New 20% charge: remaining
- £8,000
£500 difference for an otherwise qualifying first-home purchase above £450,000. This example is not a refund of past charges.
How much does the lower charge save?
On a £10,000 Lifetime ISA balance, a 25% withdrawal charge would leave £7,500. A 20% charge leaves £8,000, a difference of £500. This is a simple balance example, not advice on whether to withdraw.
The 20% charge is applied to the full withdrawn amount, including government bonuses and any growth; it does not mean the government has raised the £450,000 price cap.
Does every first-time buyer qualify?
No. Official rules still include first-time buyer status, a qualifying residential purchase, using a solicitor or conveyancer, taking a mortgage, and normally waiting at least 12 months since the first LISA payment. Check the detailed HMRC guidance with your provider.
What is coming after this?
Budget 2026 also announced a new First Time Buyer ISA planned for April 2029. That is a separate proposed product and is not available today.
Should you empty your Lifetime ISA?
Not without comparing the property price, alternative savings, purchase timetable and charge consequences. Confirm the transaction qualifies and ask your conveyancer or provider how the money is paid.
Frequently asked questions
What is the Lifetime ISA penalty above £450,000 in 2026?
For an otherwise qualifying first-home purchase, the charge is 20% from 29 October 2026.
Has the £450,000 Lifetime ISA property cap increased?
No. The charge-free qualifying purchase cap remains £450,000.
Is the general Lifetime ISA withdrawal penalty now 20%?
No. Unauthorised withdrawals unrelated to the qualifying over-cap first-home measure normally remain at 25%.
Official sources and fact-checks
Information has been checked against the following original publications. Announcements may change before legislation is enacted.
- HMRC: Reduced Lifetime ISA withdrawal charge(28 October 2026)
- HMRC: Tax-free savings newsletter 24(29 October 2026)
- MoneySavingExpert: Independent LISA change explanation(28 October 2026)
- HM Treasury: Budget 2026(28 October 2026)
What can you do next?
Explore a relevant MMG guide or calculator. Calculator assumptions may need updating when new rules take effect.