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- Update
Lifetime ISA withdrawal charge cut to 20% for homes over £450,000
Buying your first home above £450,000? The Lifetime ISA withdrawal charge is now 20% for qualifying purchases. See the conditions and worked examples.
At a glance
Buying your first home above the £450,000 Lifetime ISA threshold has become less costly if you need to use your LISA savings. From 29 October 2026, qualifying purchases attract a 20% withdrawal charge. GOV.UK's current guidance reflects the change. [1] [2]
- 20% charge: a first-home purchase above £450,000 that meets the other conditions.
- No charge: a qualifying first-home purchase costing £450,000 or less.
- 25% charge: other unauthorised withdrawals.
The charge-free property price cap has not been raised. This is a targeted change, not the removal of all LISA withdrawal charges.
Key figures
- 20%Charge for eligible first-home purchases above the cap. From 29 October 2026; other purchase conditions still applyRules checked 30 October 2026 · Current law · Source [1], [2], [3]
- £450,000Maximum home price for a qualifying charge-free purchaseRules checked 30 October 2026 · Current law · Source [1]
- 25%Other unauthorised withdrawalsRules checked 30 October 2026 · Current law · Source [1]
- £1,000Extra available for the purchase. On a £20,000 withdrawalIllustration, no returns or fees · PayCalc calculation · Source [1]
What difference does it make?
The charge applies to the amount withdrawn, including the government bonus, not just your original contributions. Here is what remains from the same withdrawal at each rate.
| Withdrawal, including bonus | Previous 25% charge | Reduced 20% charge | Extra available |
|---|---|---|---|
| £10,000 | £7,500 | £8,000 | £500 |
| £20,000 | £15,000 | £16,000 | £1,000 |
| £30,000 | £22,500 | £24,000 | £1,500 |
PayCalc UK calculations: the difference between the 25% and 20% charge on the same withdrawal. Bars start at zero. Provider fees are excluded; these are not investment forecasts.
Does 20% simply return the government bonus?
In an example with no interest, investment growth, losses or fees, yes. Suppose you contributed £16,000 over several tax years and received £4,000 in government bonuses. Your balance would be £20,000.
Same balance, different charge
Previous charge: 25%
Reduced charge: 20%
Each bar represents the full withdrawal. Blue shows the amount kept; the striped segment shows the charge. No returns, losses or fees are included.
Previously, a 25% charge removed £5,000 and left £15,000: £1,000 less than your own contributions.
At 20%, the charge is £4,000, leaving £16,000. You recover your original contributions in this simplified example, but do not keep the bonus.
Real balances can include returns or losses, so the amount you receive will not necessarily equal what you originally paid in.
Who qualifies?
The reduced charge is for first-home purchases above £450,000. The other purchase requirements still apply. [1]
- At least 12 months must have passed since your first LISA payment.
- You must buy with a qualifying mortgage. Certain private mortgages involving relatives do not qualify.
- A solicitor or conveyancer must handle the purchase, and the provider pays the funds directly to them.
Ask your provider and conveyancer to confirm the withdrawal process before requesting funds. Do not assume a transfer into your own current account will receive the reduced rate.
The change is made by the Individual Savings Account (Amendment) (No. 3) Regulations 2026, for withdrawals made on or after 29 October 2026. If the purchase falls through and the money goes back to your provider under the existing rules, the provider must put the 20% charge back into your Lifetime ISA. [3]
What has not changed?
A withdrawal for an unrelated expense does not qualify: the usual 25% unauthorised-withdrawal charge remains. Existing charge-free routes, including eligible withdrawals from age 60 and terminal illness, also remain. [1]
Budget 2026 separately announced a First Time Buyer ISA planned for April 2029. That future product is distinct from this change to existing Lifetime ISA withdrawals. [2]
What this means for you
- Check the property price and all purchase conditions with your provider and conveyancer.
- Budget using the amount left after the charge, not the full LISA balance.
- Allow separately for Stamp Duty, legal fees and other buying costs.
Plan another part of your first-home budget.
Sources and method
Checked 30 October 2026. GOV.UK's current withdrawal guidance confirms the targeted 20% treatment; Budget 2026 supplies the 29 October effective date. This is distinct from the announced First Time Buyer ISA planned for April 2029.
Checked 8 November 2026 against SI 2026/1130, made 27 October and in force 29 October 2026: the 20% charge applies to withdrawals made on or after 29 October 2026, and new paragraph 10A restores the charge to the Lifetime ISA if the purchase fails to complete and the money is returned under the existing rules.
PayCalc UK illustrations: amount withdrawn x 75% under the previous charge, or x 80% under the reduced charge. The difference is 5% of the withdrawal. All comparisons use the same withdrawal amount, including bonus, and exclude provider fees.
The 20,000-pound balance example assumes 16,000 pounds contributed over several tax years and 4,000 pounds in bonuses, with no interest, investment growth, losses or fees. Returning the original contributions is an illustration, not a guarantee for actual accounts.
- GOV.UK, Lifetime ISA: withdrawing money from your Lifetime ISA ↗, Buying your first home; saving for later life; unauthorised withdrawals. Accessed 30 October 2026.
- HM Treasury, Budget 2026 ↗, Section 6.1 and section 7.20: Lifetime ISA withdrawal charge; effective 29 October 2026. Published 28 October 2026. Accessed 30 October 2026.
- legislation.gov.uk, The Individual Savings Account (Amendment) (No. 3) Regulations 2026 (SI 2026/1130) ↗, Regulation 1(3); Schedule 1, new paragraphs 6A and 10A. Published 27 October 2026. Accessed 8 November 2026.
This article is general information, not financial advice. Check your own position before you act.