A Lifetime ISA is meant to stay put until you buy your first home or reach 60. You can take money out at any time, but outside those uses you pay a charge that costs you some of your own money, not just the bonus.
When you can withdraw, and the charge
You can take money out of a Lifetime ISA without a charge to buy your first home, from age 60, or if you're terminally ill with less than 12 months to live; any other withdrawal, or a transfer to another type of ISA before 60, costs a 25% charge on the whole amount you take out, which takes back more than the bonus.- Buying your first home, if the purchase meets the Lifetime ISA first-home conditions.
- Being aged 60 or over.
- Being terminally ill, with less than 12 months to live.
- Any other withdrawal costs a 25% charge on the whole amount withdrawn, bonus included, so you get back less than you paid in.
- Transferring a Lifetime ISA to another type of ISA before 60 also costs the charge.
- If you die, the account ends and there's no charge on withdrawing the money.
GOV.UK’s examples
Taking out the whole pot. With no growth, £800 paid in earns a £200 bonus, making £1,000. The charge on the whole £1,000 is £250, leaving £750: £50 less than you paid in.
Covering a bill. To end up with £120 for a bill, you’d withdraw £160: the charge is £40, and you receive £120. Because the charge comes off what you withdraw, you have to take out a third more than you need.
In percentage terms, a withdrawal charge of 25% on money that was topped up by 25% leaves you with 93.75% of what you paid in, before any interest or growth.
Withdrawals with no charge
- Your first home: if the purchase meets the conditions. You can use a Lifetime ISA, bonus included, towards your first home if it costs £450,000 or less, you buy at least 12 months after your first payment in, a conveyancer or solicitor acts for you and you buy with a mortgage; any other withdrawal before 60 costs a 25% charge.
- From age 60: take out as much as you like, tax-free.
- Terminal illness: if you have less than 12 months to live.
- On death: the account ends, and there’s no charge on paying out the money.
- Moving to another Lifetime ISA: a transfer to another Lifetime ISA isn’t a withdrawal. A transfer to any other type of ISA before 60 is.
Is it ever worth paying?
The charge is certain, so check the alternatives first: other savings, a cheaper form of borrowing, or waiting. It can make sense to pay it when the alternative costs more, for example when the money would clear debt charging more than the charge would cost you, or in a genuine emergency. It rarely makes sense to pay it to reach money you’d simply like to spend sooner.
If your plans have changed (you’ll now buy a home over £450,000, or won’t buy at all), you don’t have to take the money out: you can stop paying in and leave it to use for later life from 60, charge-free.
Related guides
- ISAs guide: the ISA types, the allowance and the main choices in one place
- Lifetime ISA guide: the rules, the bonus, and LISA or pension
- Lifetime ISA calculator: the cost of the charge on your own figures
- How to save for a house deposit: the first-home conditions in full
- Pay off debt or save?: weighing debt against savings