The withdrawal charge for Lifetime ISA (LISA) savings used by first-time buyers to purchase a property costing more than the £450,000 property price cap was reduced from 25% to 20% with effect from 29 October 2026.

The change is intended to make the rules fairer for buyers who need to purchase a property above the cap and followed considerable campaigning for a change to the rules. Under the previous rules, withdrawing funds for such a purchase attracted a 25% charge, meaning savers could receive back less than they had originally contributed. The reduced charge allows them to retain their own contributions while still forfeiting the government bonus.

The 20% charge applies only where funds are used for an otherwise qualifying first-time residential property purchase above £450,000. Purchases at or below the limit remain eligible for penalty-free withdrawals. Other unauthorised withdrawals, such as taking money out before age 60 for purposes other than an eligible first-home purchase, will continue to attract the 25% charge.

LISA holders planning to buy their first home above the £450,000 limit should therefore benefit from the reduced charge, although they will still lose the government bonus. Those considering other withdrawals should be aware that the existing 25% charge continues to remain in place.