There are two types of withdrawals when it comes to Lifetime ISAs: eligible withdrawals & ineligible withdrawals. Eligible withdrawals are those which are for eligible house purchases.
To make sure your withdrawal is eligible, your conveyancer/solicitor needs to confirm your Lifetime ISA withdrawal request with us, so don’t try to withdraw via the app. Instead, as soon as you know you need the funds, get in touch with Customer Support, and we’ll get the ball rolling – once we’ve got all the info from your conveyancer/solicitor and everything is confirmed, your funds will be released within 30 days. Read more about this process here.
Ineligible withdrawals
Ineligible withdrawals (partial or full) involve the government applying a 25% penalty to. You can request to withdraw via the Tembo app. Examples of ineligible withdrawals include:
If the home you’re buying doesn’t meet all of the following criteria: it’s your first home, is being bought via the services of a conveyancer/solicitor, it costs under £450,000 in the UK, is to live in, is being bought with a mortgage, and you’ve had your Lifetime ISA open for 12 months or more.
If you haven’t had your Lifetime ISA open for at least 12 months.
If you need the money for any other reason, and you’re under 60 years old.
If you are not terminally ill.
The government applies a 25% total withdrawal penalty to any amount being withdrawn for any of the reasons above. The 25% penalty means you’d get back less than what you put in: you’d have to give back the bonus, plus you’d pay a penalty of 6.25%, which is made up of your own money. Think of it like losing the bonus, plus having to pay £6.25 to the government for every £100 you’re withdrawing.
Other stuff to note:
Ineligible withdrawals from our Cash LISA have a 45-day notice period: you’ll receive your funds at the end of this period.
Ineligible withdrawals from Stocks & Shares LISA are usually completed within 10 working days.
Once a withdrawal request has been submitted in-app, we're not able to cancel or stop it, so please make sure you're certain before clicking the final button to submit your request.
How withdrawing affects your allowances
With a Lifetime ISA, you can’t replace them in the same tax year. Doing this would mean that your money would be counted twice towards your £4,000 yearly allowance. Eg:
If you add in £4,000 and then you withdraw that £4,000 in the same tax year, you won’t be able to add any more money to your Lifetime ISA until the allowance refreshes at the start of the following tax year.
If you were to add in £1,000 and withdraw it in the same year, you’d only be able to deposit a further £3,000 that year (what would be left of your £4,000 annual allowance).
It’s also worth noting that you can’t open a new Lifetime ISA with another provider, or with us, until after the new tax year has begun on 6th April.
Read more about government charges and eligibility here.