Reduce Lifetime ISA withdrawal charge for properties over the property price cap
Published 28 October 2026
© Crown copyright 2026
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/lifetime-isa-withdrawal-charge/reduce-lifetime-isa-withdrawal-charge-for-properties-over-the-property-price-cap
Who is likely to be affected
First-time house buyers who withdraw funds from a Lifetime ISA (LISA) to purchase a property above the Lifetime ISA property price cap and Lifetime ISA managers and conveyancers.
General description of the measure
The measure amends the Individual Savings Account Regulations 1998 to reduce the Lifetime ISA withdrawal charge from 25% to 20% where a first-time buyer uses funds held within the Lifetime ISA to purchase a property the purchase price of which exceeds the Lifetime ISA property price cap of £450,000.
Policy objective
The measure supports first-time buyers using Lifetime ISA funds to purchase a property above the Lifetime ISA property price cap. Reducing the withdrawal charge to 20% will make the treatment of these withdrawals fairer by allowing affected savers to retain their own contributions while preserving the principle that the government bonus is available only for qualifying purchases within the scheme rules.
Background to the measure
There have been no previous announcements or consultation on the measure.
Detailed proposal
Operative date
The measure will have effect from 29 October 2026 for Lifetime ISA withdrawals made for property purchases exceeding £450,000.
Current law
The Lifetime ISA rules are contained in the Savings (Government Contributions) Act 2017, and the Individual Savings Account Regulations 1998 (SI 1998/1870) (‘the ISA Regulations’) which are made under powers in Chapter 3 of Part 6 of the Income Tax (Trading and Other Income) Act 2005 and section 151 of the Taxation of Chargeable Gains Act 1992.
The ISA Regulations currently distinguish between withdrawals which do not attract a 25% withdrawal charge and those which do. Properties whose purchase price is £450,000 or below do not attract a withdrawal charge.
Proposed revisions
The ISA Regulations will be amended to create a distinct category of withdrawal where funds are used for an otherwise eligible residential purchase, but the purchase price exceeds the LISA property price cap of £450,000. The regulations will provide that a 20% charge applies to that category. All other unauthorised withdrawals will continue to be charged at 25%.
Summary of impacts
Exchequer impact (£ million)
| 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 | 2030 to 2031 | 2031 to 2032 |
|---|---|---|---|---|---|
| -15 | -20 | -20 | -25 | -25 | -25 |
These figures are set out in Table 6.1 of Budget 2026 and have been certified by the Office for Budget Responsibility (OBR). More details can be found in the policy costings document published alongside Budget 2026.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
This measure will impact the proportion of the c.1.6m individuals who have a Lifetime ISA and choose to use it to purchase their first property. In 2024 to 2025, 87,250 individuals withdrew Lifetime ISA funds for a house purchase, an increase of around 30,500 on the previous tax year, with an average withdrawal of £15,782.
Individuals will now pay a 20% withdrawal charge when they purchase a property over the property price cap (£450,000). They will not need to do anything differently but will need to familiarise themselves with this change. Those who use funds held within a Lifetime ISA to purchase a property under the property price cap will be unaffected.
This measure is not expected to impact on family formation, stability or breakdown.
Equalities impact
This measure may apply to individuals regardless of their protected characteristics. HMRC does not hold data that it can use to assess whether there are any disproportionate impacts to protected groups.
Administrative impact on business including civil society organisations
This measure will have a negligible impact on approximately 40 businesses approved by HMRC as ISA managers and who currently offer Lifetime ISAs to their customers, and on conveyancers. One-off costs could include them familiarising themselves with the change and updating systems. It is not expected there will be any ongoing costs.
This measure is not expected to impact civil society organisations.
This measure is expected overall to have no impact on the business experience of dealing with HMRC as the change does not change any process or tax administration obligations.
Operational impact (£ million) (HMRC or other)
The measure will require changes to HMRC’s IT systems. We currently estimate this will cost around £480,000.
Other impacts
Other impacts have been considered, and none have been identified.
Monitoring and evaluation
Consideration will be given to monitoring this measure through information collected from ISA managers, existing ISA reporting returns and ongoing stakeholder engagement.
Further advice
If you have any questions about this change, contact the savings policy team by email at enquiries.savings@hmrc.gov.uk.