LISA Exit Penalty Calculator UK
Work out the 25% withdrawal charge on a Lifetime ISA — and see why getting your money out costs more than the bonus you were given, leaving you worse off than if you’d never used a LISA at all.
The Lifetime ISA gives you a 25% government bonus on what you save, up to £1,000 a year — but take the money out for anything other than a first home or retirement and you pay a 25% withdrawal charge. People assume a 25% bonus and a 25% charge cancel out. They don’t. The charge applies to your whole pot, bonus included, so for every £1,000 you paid in you get back just £937.50 — a real loss of 6.25% of your own money, not zero. Buy a home above the £450,000 cap and the same charge bites. This calculator shows exactly what you’d get back after the penalty, and how much of your own contributions the charge quietly takes — the trap the headline numbers hide. If a first home is the goal, check the purchase price against the cap with the Stamp Duty Calculator and model the mortgage with the Mortgage Calculator.
Lifetime ISA balance
Withdrawal reason
Withdrawal result
Estimated amount you receive
Calculating…
Calculating…
Withdrawal charge
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Loss vs your contributions
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Effective penalty
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Bonus kept / lost
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Full LISA balance
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Charge status
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LISA withdrawal charge — quick lookup
The left table shows what you actually receive after the 25% charge, by pot size — useful if you just want the cash figure. The right shows the part people miss: your position against the money you personally paid in, where the charge turns a 25% bonus into a real loss. Both assume no investment growth; the calculator above runs your exact pot.
| Pot value | 25% charge | You receive |
|---|---|---|
| £5,000 | £1,250 | £3,750 |
| £10,000 | £2,500 | £7,500 |
| £20,000 | £5,000 | £15,000 |
| £30,000 | £7,500 | £22,500 |
| £40,000 | £10,000 | £30,000 |
| You paid in | You get back | Net |
|---|---|---|
| £1,000 | £938 | −£63 |
| £4,000 | £3,750 | −£250 |
| £8,000 | £7,500 | −£500 |
| £16,000 | £15,000 | −£1,000 |
| £32,000 | £30,000 | −£2,000 |
Right table assumes no growth, so the pot is your contributions plus the 25% bonus. The charge then takes 6.25% of what you personally paid in — for every £4,000 of your own money, you’re £250 down. Investment growth changes the figures but not the principle: the charge always claws back more than the bonus gave.
How the 25% withdrawal charge works — the trap
The Lifetime ISA is built around two numbers that look like they cancel out and don’t. Pay in, and the government adds a 25% bonus — £1,000 on the maximum £4,000 a year. Withdraw for anything other than a first home or reaching age 60, and you pay a 25% withdrawal charge. The instinct is that a 25% bonus and a 25% charge net to zero. The maths says otherwise, and the reason is what the percentages are taken from.
The bonus is 25% of your contribution. The charge is 25% of your whole pot — which already includes the bonus. So you’re paying 25% on a bigger number than you earned 25% on:
That 6.25% is the figure the headline rate hides. For every £1,000 of your own money you put in and then withdraw early, you lose £62.50 — not nothing. On a full £4,000 year, that’s £250 gone. The bonus you were given is clawed back in full, plus a slice of your own savings on top. It’s not a returned gift; it’s a genuine penalty.
The two ways the charge bites
Most people meet the charge in one of two situations. The first is needing the money for something other than a first home or retirement — an emergency, a change of plan, a house purchase that falls through. The second is more insidious: buying a first home that turns out to cost more than the £450,000 LISA property cap. The cap is fixed and hasn’t moved, so in higher-priced areas a perfectly ordinary first home can tip over it — and the moment it does, every penny you withdraw for that purchase attracts the 25% charge, bonus and all. Buyers who saved diligently into a LISA can find their own scheme penalises them for buying in the market they were saving for.
Worked examples
Four scenarios showing where the charge applies, what it costs, and the moments it can be avoided entirely.
Scenario 1 · Cashing out for an emergency
The 6.25% you didn’t expect to lose
25% charge: £2,500 → you receive £7,500
Net vs your own £8,000: −£500
Needing the cash for a non-qualifying reason, this saver gets back £7,500 — £500 less than they personally paid in. The £2,000 bonus is gone and £500 of their own money with it. Compared with having used a normal ISA, where they’d have their £8,000 intact, the LISA has cost them £500 for the privilege of touching their own savings early.
Scenario 2 · First home over the £450k cap
Penalised for buying in your own market
Over the £450,000 cap → 25% charge: £5,000
Usable toward purchase: £15,000
This is the cap trap. The home is a normal first purchase in a pricey area, but at £465,000 it’s £15,000 over the LISA limit — so the whole £20,000 pot attracts the charge if used for it. The saver loses £5,000 and their £4,000 bonus, ending up with £15,000 of their own £16,000 contributions. The scheme designed to help them buy has penalised the purchase.
Scenario 3 · First home under the cap
The way it’s meant to work — no charge
Under the £450,000 cap → no charge
Full amount toward deposit: £20,000
Used as intended, the LISA is excellent. Buying a £280,000 first home, this saver puts the entire £20,000 — their £16,000 plus a free £4,000 bonus — straight toward the deposit, with no charge at all. This is the case where the LISA beats a normal ISA outright: a guaranteed 25% top-up on savings that go to the right purchase.
Scenario 4 · Withdrawing with growth
Growth doesn’t rescue the charge
25% charge: £3,750 → you receive £11,250
Same growth in a normal ISA: £12,000
Even with strong investment growth, the charge still wins. A £15,000 pot returns £11,250 after the penalty — but the same £10,000 growing 20% in an ordinary stocks and shares ISA, with no bonus and no charge, would be worth £12,000 and fully accessible. The charge applies to the grown pot, so growth is taxed by the penalty too. Early withdrawal undoes the LISA’s advantage entirely.
The four ways out — which trigger the charge
Not every withdrawal is penalised. Whether you keep the bonus or lose 6.25% of your own money comes down to which of four exits you’re taking. Knowing them in advance is how you avoid sleepwalking into the charge. Here they are, from free to costly:
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1
First home, under £450k — no charge
The headline purpose. Buy a first home up to £450,000 after holding the LISA at least 12 months, and the whole pot, bonus included, goes to the purchase free of any charge.
This is the case the scheme is built for, and where it clearly beats a normal ISA.
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2
Age 60 or over — no charge
From your 60th birthday, you can withdraw the entire pot for anything, with no charge. This is the LISA’s second legitimate use: a retirement top-up alongside a pension.
Before 60 and not for a first home, there’s no penalty-free route — that’s the constraint to plan around.
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3
Terminal illness — no charge
If you’re diagnosed with less than 12 months to live, the full pot can be withdrawn charge-free. A narrow exception, but an important one to know exists.
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4
Anything else — the 25% charge
Every other withdrawal — an emergency, a change of plan, or a first home over the £450,000 cap — triggers the charge. You lose the bonus and 6.25% of your own contributions.
This is the route to avoid, and the cap is the one that catches careful savers out.
£20,000 pot — what you keep, by exit
The same pot, four very different outcomes:
The same £20,000 is worth £20,000 or £15,000 depending entirely on which door you leave by. Two of the four exits are free; two cost you £5,000. The cap trap stings most because it disguises itself as the intended use — you’re buying a first home, exactly what the LISA is for, but a price tag over £450,000 quietly reclassifies it as a penalised withdrawal. Before committing to a LISA, the honest question is whether your likely first home will come in under the cap, and whether you can leave the money untouched until then.
When the LISA still wins despite the charge
None of this means the LISA is a bad product — used as intended, the 25% bonus is free money no other account matches. The charge only matters if you withdraw early for the wrong reason. The decision is really about certainty: if you’re confident the money is going to a first home under the cap or staying put until 60, the LISA is hard to beat. If there’s a real chance you’ll need the cash sooner, or buy above £450,000, a normal stocks and shares ISA keeps your money fully accessible and charge-free — you forgo the bonus, but you also forgo the trap. Match the account to how sure you are of the plan.
Two scenarios that change the verdict
What if…
Your first home costs just over £450k?
What if…
You’d used a normal ISA instead?
Key Lifetime ISA terms explained
The LISA mixes ISA rules, a government bonus, and a penalty most savers don’t fully grasp until they hit it. The ten terms below cover what you’ll meet when opening, paying into, and — the risky part — withdrawing from a Lifetime ISA.
- Lifetime ISA LISA
- A tax-free savings account for those aged 18–39 to open, designed for a first home or retirement. The government adds a 25% bonus on contributions, but early withdrawals for other reasons trigger a 25% charge.
- Government bonus
- The 25% top-up the government pays on your contributions, up to £1,000 a year on the £4,000 maximum. Free money if used for a qualifying purpose, fully clawed back (and more) if not.
- Withdrawal charge
- The 25% penalty on any withdrawal that isn’t a first home, age 60, or terminal illness. Because it applies to the whole pot including the bonus, it costs you 6.25% of your own contributions, not just the bonus back.
- £450,000 property cap
- The maximum price of a first home you can buy with LISA funds charge-free. Buy above it and the full 25% charge applies. The cap is fixed UK-wide, so it bites hardest in higher-priced areas.
- First-time buyer
- For LISA purposes, someone who has never owned property anywhere in the world. You must also be buying a home you’ll live in, with a mortgage, to use the LISA charge-free toward a purchase.
- 12-month rule
- You must have held the LISA for at least 12 months before using it for a first home charge-free. Open one early — even with a small deposit — to start the clock if a purchase is on the horizon.
- Effective loss (6.25%)
- The real cost of an early withdrawal on your own money. Because a 25% charge on a pot already boosted 25% reclaims more than the bonus, you end up 6.25% down on what you personally paid in.
- Cash LISA vs stocks & shares LISA
- A LISA can hold cash (like a savings account) or investments. Cash suits a near-term home purchase; stocks and shares suit a longer retirement horizon but can fall in value, which matters given the charge applies to the grown pot.
- Annual ISA allowance
- The £4,000 you can pay into a LISA each year counts toward your overall £20,000 ISA allowance. Maxing the LISA leaves £16,000 for other ISAs in the same tax year.
- Age limits
- You can open a LISA between 18 and 39, and pay in (with the bonus) until 50. Withdrawals are charge-free from 60. The window to open one closes at 40, so timing matters if you’re close.
Five mistakes people make with the LISA charge
The LISA penalises misunderstanding. These five errors, drawn from the recurring r/UKPersonalFinance threads on Lifetime ISAs, are how savers lose money on a scheme meant to give it to them.
Assuming the 25% charge just returns the bonus
The most common misread. A 25% charge on a pot already boosted 25% reclaims more than the bonus gave — you lose 6.25% of your own contributions on top. For every £4,000 of your money withdrawn early, that’s £250 gone, not zero. The percentages don’t cancel because they’re taken from different bases.
Cost: 6.25% of your own savings, unexpectedly Fix: treat early withdrawal as a real lossIgnoring the £450,000 property cap
The cap is a cliff edge with no relief just above it. Buy a first home at £451,000 and the entire LISA pot attracts the 25% charge, even though it’s a genuine first purchase. In pricey areas, an ordinary home can breach it. Check likely prices against £450,000 before relying on the LISA for the deposit.
Cost: £5,000+ charge on an intended purchase Fix: confirm your area’s prices fit under the capForgetting the 12-month holding rule
You can’t use a LISA charge-free for a first home until you’ve held it 12 months. Buyers who open one only when a purchase is imminent find their funds locked behind the charge. If a home is even a possibility within a year or two, open a LISA early — a small deposit starts the clock.
Cost: the bonus locked when you need it Fix: open early to start the 12-month clockUsing a stocks & shares LISA for a near-term home
Investments can fall just when you need them, and the charge applies to whatever the pot is worth on withdrawal. For a home purchase within a few years, a cash LISA is safer — a market dip before completion could shrink your deposit at the worst moment. Match the LISA type to your time horizon.
Cost: a market dip shrinking your deposit Fix: cash LISA for short horizons, S&S for longOver-funding a LISA you might need early
Pouring savings into a LISA when there’s a real chance you’ll need them before a first home or 60 risks locking money behind the charge. Keep an accessible emergency fund outside the LISA, and only commit money you’re confident reaches a qualifying use. A normal ISA stays penalty-free if plans change.
Cost: emergency cash trapped behind a penalty Fix: keep an emergency fund in an accessible ISAFrequently asked questions
How much is the LISA exit penalty?
The withdrawal charge is 25% of the amount you take out, applied to your whole pot including the government bonus. Because the charge is on a pot already boosted 25%, it reclaims more than the bonus gave.
The real cost is 6.25% of the money you personally paid in. Withdraw £10,000 of pot built from £8,000 of your own contributions, and you get back £7,500 — £500 less than you saved. It’s a genuine loss, not just the bonus being returned.
Why do I lose money if the bonus and charge are both 25%?
Because the two percentages are taken from different amounts. The bonus is 25% of your contribution; the charge is 25% of your whole pot, which already includes that bonus. So you’re charged 25% on a bigger number than you earned 25% on.
Pay in £1,000, get a £250 bonus for a £1,250 pot. A 25% charge on £1,250 is £312.50 — more than the £250 bonus. You get back £937.50, losing £62.50 of your own money. That’s the 6.25% effective loss.
Can I avoid the LISA withdrawal charge?
Yes, in three situations. Using the LISA to buy a first home up to £450,000 (after holding it 12 months), withdrawing from age 60, or in cases of terminal illness. All three are charge-free, and you keep the full bonus.
Any other withdrawal — an emergency, a change of plan, or a first home over the £450,000 cap — triggers the 25% charge. There’s no partial relief, so planning around these exits is the only way to avoid it.
What happens if my first home costs more than £450,000?
The £450,000 cap is a hard cliff edge. If your first home costs even £1 more, using the LISA toward it triggers the full 25% charge on the whole pot — there’s no partial relief just above the limit.
This catches careful savers in higher-priced areas, where an ordinary first home can breach the cap. Before relying on the LISA for a deposit, check that likely prices in your area fit under £450,000, because the scheme can otherwise penalise the exact purchase it was meant to help with.
Is a LISA worth it if I might need the money early?
It depends on how confident you are about the plan. If you’re sure the money is going to a first home under the cap or staying until age 60, the 25% bonus is excellent and hard to beat. If there’s a real chance you’ll need the cash sooner, the charge can leave you worse off than a normal ISA.
A sensible approach is to keep an accessible emergency fund outside the LISA and only commit money you’re confident reaches a qualifying use. That way the bonus works for you without the risk of the charge biting.
Can I transfer a LISA to a normal ISA to avoid the charge?
Transferring out of a LISA to a different type of ISA counts as a withdrawal, so it triggers the 25% charge unless you’re 60 or older. You can’t sidestep the penalty by moving the money to a normal ISA.
You can transfer between LISA providers without a charge, which is worth doing for a better rate or to switch between cash and stocks and shares. But getting LISA money into an unrestricted account before 60, without buying a qualifying home, always costs the charge.
Does the charge apply to investment growth too?
Yes. The 25% charge applies to the whole pot value at withdrawal, including any investment growth, not just your contributions and bonus. So growth is effectively penalised at the same rate.
This is why a stocks and shares LISA withdrawn early can underperform a normal stocks and shares ISA holding the same investments — £10,000 growing 20% returns £11,250 from a LISA after the charge, versus £12,000 from an ordinary ISA with no bonus and no charge.
How long do I need to hold a LISA before using it for a home?
At least 12 months from your first payment. Buy a first home before the LISA has been open a year and the charge applies, even for a qualifying purchase under the cap.
If a home purchase is even a possibility within the next year or two, it’s worth opening a LISA early with a small deposit just to start the clock. The 12-month rule catches buyers who only open one when a purchase is already imminent.
Related calculators
A LISA decision sits within the wider first-home picture — the deposit, the mortgage, the upfront tax, and the alternative of investing instead. These calculators handle each piece.
Methodology & sources
How the maths works
The withdrawal figure takes your total pot — contributions plus the 25% government bonus plus any investment growth — and applies the 25% charge to that whole amount, returning the remainder. The effective loss on your own money is shown separately: because a 25% charge on a pot boosted 25% reclaims 31.25% of your original contribution while the bonus only added 25%, the net loss on contributions is 6.25%. The property comparison applies the charge where the home price exceeds the £450,000 cap and shows zero where it falls below.
These are exact arithmetic results for the standard charge, not estimates. The figures assume the current 25% bonus and 25% charge and the £450,000 cap; investment growth, where shown, is illustrative. The calculator demonstrates how the charge behaves so you can see the real cost of an early exit.
Assumptions and conventions used
- Bonus: 25% of contributions, up to £1,000 a year on £4,000
- Charge: 25% of the whole pot withdrawn, bonus and growth included
- Effective loss: 6.25% of your own contributions (no growth)
- Property cap: £450,000 for a charge-free first-home purchase
- Penalty-free exits: first home under cap, age 60, terminal illness
- 12-month rule: LISA held at least a year before a charge-free home purchase
- Figures shown are illustrative of the mechanics, not personal advice