Lifetime ISAs are a relatively new type of tax-efficient investment. They allow eligible investors to invest up to £4,000 per tax year and receive a government bonus of 25%. The funds can be withdrawn, but if this is an “unauthorised” withdrawal it will attract a charge of 25%. This claws back the government bonus, but means the investor gets back less than they initially put in.

Example. Jorge put £1,000 into a LISA in 2019, receiving a bonus of £250. However he had to withdraw all the funds later in the year. He was charged 25% x £1,250 = £312.50.


To help with living costs during the crisis, the government has reduced the charge to 20% for withdrawals made between 6 March 2020 and 5 April 2021. This removes the penalty element. However, warn clients that anything they have deposited this year will count toward their £4,000 limit if they want to resume savings later on.

Clients can now access Lifetime ISA savings and only lose the government bonus until April 2021, which could help cash flow significantly.

This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit or call 01233 653500.