Martin Lewis: Is a Lifetime ISA win coming in the Budget?
A penalty paid by first-time buyers accessing savings in Lifetime ISAs (LISAs) when buying homes above the scheme's £450,000 property price limit could be scrapped, it's been revealed. A new report suggests the Chancellor will remove the withdrawal fee in his upcoming Budget. This would be a win for MoneySavingExpert.com and its founder Martin Lewis who have long campaigned on the issue.
According to politics news organisation Politico, the Chancellor Jeremy Hunt will use the Spring Budget on Wednesday 6 March to announce a number of changes to LISA rules. You can see below, or go to Twitter, for Martin's instant reaction to this.
Martin's letter to the Chancellor
And here's the section of the letter Martin tweeted about:
Cancel the Lifetime ISA (LISA) withdrawal penalty for all first-time buyers
The LISA is a product those aged 18 to 39 are encouraged to open to start saving towards their first home. The 25% bonus the state adds has helped many build up a deposit. Yet LISAs haven’t kept up with the times, and many young people, especially in South-East England, are now finding themselves fined when they use the money towards their first property.
You can only use a LISA on a qualifying property, which is one worth up to £450,000.
That £450,000 limit has remained frozen since the LISA launched in 2017.
Average house prices have risen more than 30% in that time.
In 26 of 32 London boroughs, average first-time buyers’ properties now cost over £450,000.
To withdraw for any purpose other than buying a qualifying home (or from aged 60), you pay a 25% penalty.
For many, who have saved in a LISA and now find themselves priced out as the home being bought is above the threshold, they have to pay the 25% penalty to withdraw their money. On £20,000 saved, the 25% bonus added is £5,000, but the withdrawal penalty is £6,250, so they end up with £1,250 LESS than what they put in. The penalty was imposed to stop LISAs being used for unintended reasons – people are now being fined for using those LISAs on exactly what they were intended for.
The simple solutions are to index-link the £450,000 limit to house prices (backdated to 2018) and to reduce the withdrawal penalty for those buying a first-time property above the limit to 20%, which means they at least get back what they put in. You said to me in the programme that you can count yourself “properly lobbied” on this. I hope there was no harm reiterating it here.
Here's the full letter Martin sent to the Chancellor, which urges him to act on issues including LISAs.
Our full Lifetime ISAs guide contains further info on how they work, as well as our current best buys for those whom a LISA still works for.
In response to Politico's report, a spokesperson for HM Treasury told MoneySavingExpert.com: "As ever, we keep all aspects of the savings rules, including the LISA, under review."
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18 March 2025
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