LISA Withdrawal Rules: When Can You Access Your Money?

How Do You Withdraw From a LISA to Buy Your First Home?

You can withdraw your entire LISA balance — contributions, government bonus, and any growth — tax-free for a first home purchase, provided the property costs £450,000 or less, you are a first-time buyer, you are buying with a mortgage, and the account has been open for at least 12 months. Your conveyancer requests the funds directly from the provider — you cannot withdraw the cash yourself and then use it.

1. The property costs £450,000 or less.
2. You’re a first-time buyer — you have never owned a property anywhere in the world.
3. You’re buying with a mortgage (cash purchases don’t qualify).
4. Your LISA has been open for at least 12 months.
5. Your conveyancer (not you) requests the withdrawal directly from your LISA provider — you can’t withdraw the cash and then use it.

If you’re buying jointly and both of you have LISAs, you can each use your own LISA on the same purchase — but both of you must be first-time buyers.

What Is the LISA Early Withdrawal Penalty?

If you withdraw outside a permitted circumstance, HMRC applies a 25% charge to the total amount withdrawn — your contributions plus the government bonus. Because the penalty is calculated on the inflated total, you can receive back less than you originally paid in. For example, contributing £4,000, receiving a £1,000 bonus (total £5,000), then withdrawing early results in a £1,250 deduction, leaving just £3,750.

Example: You save £4,000. The 25% bonus adds £1,000. Total balance: £5,000. You withdraw early. The 25% penalty on £5,000 = £1,250. Amount returned: £3,750 — that’s £250 less than the £4,000 you paid in. For a stocks-and-shares LISA with investment growth, the penalty base is even larger.

The penalty rate was temporarily reduced to 20% during 2020–2021 (COVID relief), but has returned to 25%.

The only exception besides the qualifying home purchase and retirement access is terminal illness — in that case, you can withdraw everything penalty-free at any age.

Note: if your LISA provider goes into administration, FSCS protection covers up to £85,000.

When Can You Withdraw From a LISA for Retirement?

You can withdraw your full LISA balance — contributions, bonuses, and any growth — completely tax-free from your 60th birthday, for any reason. This is a common source of confusion: the LISA retirement access age is 60, not 55. Workplace pensions can be accessed from 55 (rising to 57 in 2028), but the LISA has its own separate and higher age threshold.

From your 60th birthday, you can withdraw the full balance — contributions, bonuses, and any growth — completely tax-free, for any reason. You don’t need to be buying a home or retiring. You can take partial withdrawals or the full amount.

“If you’re between 40 and 59 and need access to savings in an emergency, a LISA is not the right vehicle — the penalty is significant. A Cash ISA or easy-access savings account gives you flexibility without the cost.”

Frequently asked questions

What is the LISA withdrawal penalty?

If you withdraw from a Lifetime ISA outside a permitted circumstance, HMRC applies a 25% withdrawal charge to the full amount taken out — including both your contributions and the government bonus. Because the charge is calculated on the combined total, it is possible to receive back less than you originally paid in. For example, contributing £1,000 and receiving a £250 bonus gives £1,250; the 25% charge on that is £312.50, leaving just £937.50.

When can I withdraw from a LISA without a penalty?

There are three penalty-free withdrawal routes: purchasing a first home costing £450,000 or less (with a conveyancer submitting a formal claim to HMRC); reaching age 60 and closing or drawing down the account; or being diagnosed with a terminal illness with a life expectancy of less than 12 months. All other withdrawals are subject to the government's 25% withdrawal charge.

Can I use a LISA to buy a property worth more than £450,000?

No. The penalty-free first home withdrawal route applies only where the property costs £450,000 or less. If the purchase price exceeds this threshold, the LISA funds cannot be used for that transaction without triggering the withdrawal charge. The £450,000 limit applies to the full property purchase price, regardless of how large a share the LISA covers.

What happens to my LISA if I die?

If a LISA holder dies, the account can be closed and the full value — including the government bonus and any investment growth — passed to the estate without any withdrawal penalty being applied. The funds then form part of the estate and are distributed according to the will or, where there is no will, the rules of intestacy.

Can I withdraw from a LISA for any reason before age 60?

Yes, it is possible to withdraw from a LISA before age 60 for any reason, but outside the permitted circumstances the government's 25% withdrawal charge applies to the full amount taken out. There is no restriction on making the withdrawal itself — only a significant financial penalty. This makes the LISA unsuitable as a general emergency fund, particularly if accessed before a first property purchase.