When can I withdraw money from a Lifetime ISA?

Can you take money out of a Lifetime ISA?

Yes, you can take money out of your Lifetime ISA at any time, but you’ll pay a 25% penalty if you’re under the age of 60, using the money for something other than your first home, and you’re not terminally ill. If you take money out of a Lifetime ISA for any other reason, this is known as an ineligible withdrawal — and it’ll leave you with less money than you put in. That’s because not only does the 25% penalty take away any government bonus you’ve earned, it also deducts 6.25% of your initial deposit. When it comes to using your Lifetime ISA to put down a deposit for your first home purchase, you must ask your conveyancer or solicitor to withdraw your funds for you - doing this yourself could also incur the 25% penalty.

Let’s imagine you pay £4,000 into your Lifetime ISA, giving you a balance of £5,000 once the 25% government bonus has been paid. If you later decide to withdraw these funds, this means you’ll only get £3,750 back. You’ll have lost the £1,000 government bonus and £250 of your own savings. 

If you need easy access to your savings, consider a Cash ISA instead. You’ll earn tax-free interest, while still having the flexibility to spend your money on holidays, general living expenses or emergencies. 

Take a look at our guide to the Lifetime ISA withdrawal penalty to learn more about how the charge works and how you can avoid it.

When can I withdraw funds from my Lifetime ISA?

You can withdraw funds from your Lifetime ISA penalty-free if you’re a first-time buyer purchasing an eligible property, you’re aged 60 or above or you’re terminally ill, with less than 12 months to live. In order for the property to be eligible, it must be the first home you’re buying (in the UK or abroad), cost £450,000 or less and be where you intend to live (it can’t be rented out). You also must purchase the property using a mortgage (i.e. you can’t purchase the property outright), and have had your Lifetime ISA open for 12 months or more. 

How quickly can you withdraw from Lifetime ISA?

The time it’ll take to withdraw your LISA savings can vary depending on your provider, but the sooner you let them know you’re ready to buy, the better. Once you’ve told your provider that you’d like to make a withdrawal, they’ll send you a Customer Declaration Form and a Conveyancer Form to pass onto your conveyancer or solicitor. 

To speed up the process and make sure the funds are released in time, try to return them at least 30 days’ before completion. Once these forms have been processed, you can usually expect your money to be released within one or two working days for a Cash Lifetime ISA or 10 working days for a Stocks and Shares Lifetime ISA. 

Processing times can vary depending on your Lifetime ISA provider, so reach out to them for a more accurate timeline. The withdrawal process can take a little longer if you have any pending deposits or government bonuses. 

Learn more: How long does it take to buy a house?

When it comes to withdrawing money from your Lifetime ISA for retirement, individual providers will have their own policies and timelines in place. Here at Tembo, we require 30 days’ notice to withdraw Lifetime ISA funds for retirement. 

For ineligible withdrawals from your Lifetime ISA, we require 45 days’ notice for Cash Lifetime ISAs and 10 days’ notice for Stocks and Shares Lifetime ISAs. Once a withdrawal request has been submitted in-app, we're not able to cancel or stop it, so please make sure you're 100% certain before clicking the final button to submit your request!

Learn more: How do I know if my withdrawal is eligible?

What is the 12-month rule for Lifetime ISA?

The 12-month rule for Lifetime ISAs means that you must have the account open for at least 12 months before you can use the money to buy your first home penalty-free - and the countdown starts after you’ve deposited your first £1 in the account. If you withdraw your money sooner, you’ll pay the 25% charge on the amount withdrawn, even if you’re buying a home that meets all the other Lifetime ISA criteria. 

If you’re not sure when you’ll be ready to buy or there’s a chance your first home might be worth more than £450,000 (the maximum LISA property price), you could open a LISA today with as little as £1 just to start the clock. 

That way, if you’re in a position to buy an eligible property this time next year, you could wait until nearer the time to pop any additional savings in your LISA. Keep in mind that the sooner you add money to a Cash Lifetime ISA, the sooner you can begin to earn interest. 

Can I cancel my Lifetime ISA within 30 days?

With a Tembo Lifetime ISA, if you decide that you no longer want your account, you can cancel your Lifetime ISA within 30 days without incurring the 25% penalty charge. Your account will be closed and any funds you withdraw won’t count towards your current year’s ISA allowance. Keep in mind that if you open a Stocks and Shares Lifetime ISA, you may get back less than you put in depending on how your investments have performed since you opened the account.

If you close your Lifetime ISA after 30 days, a 25% penalty charge will be deducted from the funds you withdraw. You also won’t be able to pay into another Lifetime ISA in the same tax year.