Lisa savers slammed with £13,500 Isa withdrawal penalties

This marks a steep jump from £10,600 the previous year, according to figures from HM Revenue and Customs.

The rise reflects the growing number of savers caught by strict Lifetime ISA rules.

Lifetime ISAs permit penalty-free withdrawals only when buying a first home, after turning 60, or in cases of terminal illness.

Any other withdrawal triggers a 25 per cent charge on the entire pot, meaning savers lose not only the Government bonus but part of their own contributions.

The number of savers facing these penalties reached 129,200 in the past tax year.

By comparison, only 87,000 were able to access their funds to buy a home.

Total penalties collected by the Treasury climbed to £102million, up from £75million in 2023-2024.

The typical charge amounted to £790, though individual amounts vary depending on pot size.

The scheme now has 1.6 million active accounts, demonstrating its wide adoption since launch.

But the gap between those penalised and those successfully buying a property has raised concerns about how the product functions in today’s housing market.

Historical data shows the issue is long-running. Unauthorised withdrawals have affected 286,000 savers over six years, bringing approximately £213million in penalties to the Treasury.

A key point of pressure is the £450,000 property price limit, which has remained unchanged since the scheme began in 2017.

If the threshold had kept pace with inflation, it would now stand at £604,884.

Average UK house prices reached £272,995 in September, according to Land Registry data.

Research from Skipton Building Society shows first-time buyers in more than 10 per cent of local authority areas now face average property prices above the Lifetime ISA cap.

The frozen threshold leaves many buyers in high-cost regions unable to use their savings for suitable homes.

As a result, some savers must either abandon their plans or face substantial penalties when withdrawing funds.

Industry figures have raised concerns about the system’s impact on younger buyers.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: "Buying a property worth more than £450,000 will trigger the penalty.

"This hasn't been touched since the Lisa was introduced and in that time we've seen house prices soar."

She added: "People shouldn't be penalised when they are trying to do the right thing in buying their first home, so this limit should be revisited."

Brian Byrnes, head of personal finance at Moneybox, said: "The majority of our Lisa savers earn between £30,000 and £40,000 a year, placing them at the heart of the affordability challenge."

He said analysis by CBI Economics shows the scheme has delivered a £1billion net benefit to the Treasury, with penalties making up only 8 per cent of that total.

The Treasury has defended the current rules.

A spokesman said: "The Lifetime Isa remains focused on supporting young people to achieve the aspiration of home ownership, or to build up savings for later life, and in the last year helped around 57,000 people get onto the property ladder."

They added: "We are also committed to building 1.5 million more homes so that people can turn the dream of owning a home into a reality."

MPs on the Treasury Select Committee (TSC) have warned the scheme may not be serving its intended users.

They urged Chancellor Rachel Reeves earlier this year to review whether the Lifetime ISA should continue in its present form.

The Office for Budget Responsibility (OBR) estimates that Lifetime ISA bonuses will cost around £3billion over the five years to 2029-2030.

Our Standards: The GB News Editorial Charter