How Much Do I Lose Withdrawing From a LISA? UK 2026/27

The one-sentence answer

You lose roughly 6.25% of every £1 you contributed, plus 25% of any investment growth if it's a Stocks & Shares LISA. The government bonus does not compensate you — it's smaller than the charge that removes it.

The full arithmetic

The 25% government bonus and the 25% withdrawal charge look like they cancel out. They don't. Here's why.

Step 1 — You contribute £1,000

Your LISA holds £1,000.

Step 2 — Government adds 25% bonus (£250)

Your LISA now holds £1,250.

Step 3 — You withdraw for a non-qualifying reason

The 25% withdrawal charge is applied to the whole £1,250, not just the bonus:

£1,250 × 25% = £312.50 charge

Step 4 — You receive £937.50

You started with £1,000. You end with £937.50. You've lost £62.50 — which is 6.25% of your original contribution.

Why the maths works out that way

The government bonus is 25% of your contribution (25p per £1). The withdrawal charge is 25% of your resulting balance (25p per £1.25, i.e. 31.25p per original £1). The charge takes back more than the bonus gave you — by exactly 6.25p per £1 contributed.

Real UK worked examples

Example 1 — Cash LISA, £4,000 contribution, no growth

• You contribute: £4,000
• Government bonus: £1,000
• LISA balance: £5,000
• Withdrawal charge (25% of £5,000): £1,250
• You receive: £3,750
• Net loss: £250 (6.25% of your £4,000)

Example 2 — Cash LISA, £16,000 contributed over 4 years

• You contributed: £16,000 (£4,000 × 4 years)
• Government bonus received: £4,000
• Interest at 4% over the period (rough approximation): ~£1,900
• LISA balance approx: £21,900
• Withdrawal charge (25% of £21,900): £5,475
• You receive: £16,425
• Net loss vs contributions: £16,000 − £16,425 = you're only £425 up despite 4 years' interest and £4,000 of bonuses

Example 3 — Stocks & Shares LISA that has grown

• You contributed: £10,000
• Government bonus received: £2,500
• Investment growth over 6 years: ~£4,000 (say)
• LISA balance: £16,500
• Withdrawal charge (25% of £16,500): £4,125
• You receive: £12,375
• Net gain vs contributions: £2,375 — but at higher risk than a Cash ISA and with no bonus benefit remaining

When the 25% charge doesn't apply

The withdrawal charge is waived in three qualifying scenarios only:

1. First home purchase — property price £450,000 or under, purchased with a mortgage, and the LISA has been open for at least 12 months. Full rules in our Can I use a LISA for a house deposit? guide.
2. Age 60 — you can withdraw the whole balance for any purpose from your 60th birthday.
3. Terminal illness — with medical evidence that life expectancy is under 12 months.

Full list in our LISA penalty exceptions page.

Ways to avoid the penalty entirely

• Buy a first UK home under £450,000 using the LISA as deposit or completion funds.
• Wait until 60 and use it as supplementary retirement money.
• Don't withdraw — if you contributed but no longer plan to buy, you can leave the LISA open and access it penalty-free from age 60.

What people commonly get wrong

• Assuming the 25% charge is only on the bonus. It's on the total balance withdrawn.
• Assuming they'll break even. A LISA withdrawn early is always a loss on your original contribution (unless investment growth in a Stocks & Shares LISA exceeds 6.25%).
• Assuming a £450k+ property purchase is ok if they pay the penalty. Technically true, but paying 6.25%+ of your deposit to unlock the LISA is rarely rational — better to use non-LISA savings and leave the LISA for age 60.

Related pages

• LISA withdrawal penalty calculator — enter your own numbers
• LISA penalty exceptions — the three qualifying scenarios
• Lifetime ISA vs Help to Buy ISA — which wins for first-home savers
• Can I use a LISA for a house deposit? — the rules
• Best Lifetime ISAs UK — provider comparison
• Lifetime ISA explained — full 2026/27 guide

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Frequently asked questions

Do I actually lose money if I withdraw from a LISA?

Yes. The 25% withdrawal charge applies to the total amount withdrawn (contributions + bonus + any growth), not just the bonus. Because 25% of a bonus-inflated total is more than the 25% bonus you originally received, you always receive less than you originally put in — approximately 6.25% less on a straightforward contribution and immediate withdrawal.

Why is the effective loss 6.25%, not 25%?

You pay in £1,000. The government adds 25% (£250), giving £1,250. You withdraw £1,250 and HMRC takes 25% of that (£312.50), leaving £937.50. You started with £1,000 — the £62.50 shortfall is 6.25% of your original contribution.

When is the withdrawal charge not applied?

Three qualifying scenarios: (1) first UK home priced £450,000 or under, provided the LISA has been open at least 12 months; (2) age 60; (3) terminal illness with under 12 months' life expectancy.

Do I lose more if my LISA has grown in value?

In absolute terms yes — the 25% charge is applied to the whole withdrawal amount including any investment growth. In percentage-of-original-contribution terms it stays at approximately 6.25%.

Can I withdraw only the growth and leave the bonus?

No. Any non-qualifying withdrawal is taken pro-rata from the whole LISA. You cannot ring-fence bonus or growth to avoid the charge.