What is the Lifetime ISA withdrawal charge under section 8 of Schedule 1 to the Savings (Government Contributions) Act 2017?

The withdrawal charge is a Treasury-specified percentage applied to the sterling amount withdrawn plus the market value of any non-cash assets withdrawn from a Lifetime ISA. It applies when the withdrawal does not qualify as charge-free under paragraph 7, such as withdrawals not for a first home purchase or made before age 60.

Who is liable for the Lifetime ISA withdrawal charge to HMRC?

The plan manager and the investor are jointly and severally liable for the charge. The plan manager must deduct the charge from the withdrawal and remit it to HMRC. If no plan manager exists at the time of withdrawal, the investor alone is liable. For successor ISA transfers, both original and successor plan managers share liability.

Can the Lifetime ISA withdrawal charge exceed the government bonus amount?

Yes. The percentage set by the Treasury may result in a charge greater than the government bonus portion of the withdrawal. This means the investor can forfeit not only the entire bonus but also part of their own original contributions. This design acts as a deliberate deterrent against non-qualifying withdrawals from a Lifetime ISA.

How does liability work for successor Lifetime ISA transfers under section 8?

Where a Lifetime ISA has been transferred to a successor ISA, the plan managers of both the original and successor Lifetime ISAs are jointly and severally liable alongside the investor. However, each plan manager's liability is capped at the value of investments held in their respective ISA at the relevant time.

Savings (Government Contributions) Act 2017 section 8

Withdrawal charge on Lifetime ISA

Section 8 of Schedule 1 sets out the charge that applies when money is withdrawn from a Lifetime ISA in circumstances that do not qualify for a charge-free withdrawal under paragraph 7.

A withdrawal charge equal to a specified percentage of the amount withdrawn (or market value of non-cash assets withdrawn) must be paid to HMRC
The plan manager must deduct the charge from the withdrawal and pay it to HMRC, and both the plan manager and the investor are jointly and severally liable for the amount
Where a Lifetime ISA has been transferred to a successor ISA, the plan managers of both the original and any successor ISAs share joint and several liability with the investor, though each manager's liability is capped at the value of investments held in their respective ISA
The withdrawal charge can exceed the amount of government bonus contained within the withdrawal — meaning the investor may lose some of their own contributions as well

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