Savers using Lifetime ISAs (LISAs) have incurred approximately £102m in withdrawal penalties in the 2024/25 tax year, new figures from HMRC revealed.
This represents a sharp increase from the £75m in penalties reported for the previous year, highlighting growing concerns over how the scheme’s rules are affecting those who rely on it to help with home purchase or retirement.
The value of LISAs themselves also saw growth, with increased usage by first-time buyers.
However, the rise in penalties has prompted calls for reform of the LISA rules.
Jim Islam, CEO of OneFamily, said: “Hopeful first-time buyers are facing an uphill battle with high property prices, but the lifetime ISA offers a vital boost through the 25% bonus.
“In the 2024/25 financial year it, supported almost 90,000 people buy their first home – so it really is a lifeline for many.
“There are some potential quick-wins that would better serve those the lifetime ISA was designed for, making home ownership more achievable.
“We are calling for the penalty to be adjusted and the £450,000 property price cap, which was set in 2017, to be increased. This is the right thing to do and it would encourage more people to open a lifetime ISA and successfully get on the housing ladder.”
