Thousands of Lifetime ISA savers face repeated withdrawal penalties in 2024-25

HMRC figures released after a freedom of information request reveal that about 45,000 Lifetime ISA participants were hit with multiple unauthorised withdrawal charges in the 2024-25 tax year, with an average loss of roughly £760 per saver. The most common penalty range was up to £999, affecting a large segment of those penalised more than once. Approximately 60 savers faced charges exceeding £8,000, while another 60 incurred penalties between £7,000 and £7,999.

HMRC indicated that the average of the top 25 cumulative penalties per individual was £11,000. The Lifetime ISA offers a 25% government bonus up to £1,000, but unauthorised withdrawals—such as those made by people under 60 for non-first-home purposes—trigger a 25% charge that can erode both the bonus and personal savings. Experts warned that these penalties could hinder first-time buyers already struggling to enter the housing market.