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 if you withdraw it for anything other than your first home (worth £450,000 or less) or retirement, you’ll pay a 25% penalty on the amount you withdraw, meaning you may get back less than you paid. This is because this type of savings account is designed only for your first house purchase or retirement - nothing else. 

For example: You deposit £4,000 into your Lifetime ISA, growing to £5,000 after the government bonus. If you make an ineligible withdrawal, you’ll only get £3,750 back - losing your £1,000 bonus and £250 of your own money.

If you want to earn tax-free interest and have easy access to your savings, a Cash ISA might be a better fit. You’ll be able to withdraw your money at any time for everyday spending, travel or emergencies, without being penalised.

How do I get money out of my Lifetime ISA?

The process for withdrawing your LISA depends on whether you’re putting down a deposit on a house, retiring, or making an ineligible withdrawal. If you’re buying your first home, you’ll need to ask your conveyancer to handle the withdrawal on your behalf. They’ll send necessary forms to your Lifetime ISA provider, who’ll release the funds directly to your solicitor for your house purchase. Withdrawing the money yourself could trigger the 25% penalty, even if you’re buying a qualifying property.

Once you turn 60, you can withdraw money from your Lifetime ISA without penalty, for any purpose including retirement. Any money left in your Lifetime ISA will continue to grow tax-free, meaning you won’t pay tax on your interest or investment returns. 

If you’re withdrawing money for anything else, such as home improvements, a wedding, or to pay off debt, the 25% withdrawal charge applies.

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

How much do you lose if you withdraw from a Lifetime ISA?

When you make an ineligible withdrawal from a Lifetime ISA, you don’t just lose the government bonus - you lose a bit of your savings too. This is because the 25% penalty is applied to the total balance (including your bonus), which effectively means you’ll lose 6.25% of what you put in.

Here’s an example: You put in the maximum £4,000 in one tax year, earning the maximum £1,000 bonus from the government, bringing your total savings up to £5,000. If you try to take out the full £4,000 for an ineligible withdrawal, you’ll only get back £3,750 - a £250 loss of your own money.

Is it worth withdrawing from a Lifetime ISA early?

In most cases, no, withdrawing from your Lifetime ISA early isn’t worth it. The 25% penalty often outweighs the benefit of having immediate access to your savings.

However, it might be worth considering if:

• You urgently need the money for an emergency or debt repayment.
• You’re buying a property that’s not eligible for the LISA bonus, and do not want to use the funds for retirement instead.
• You’re switching savings strategy and understand the penalty.

If you think you might need flexible access in the future, you could split your savings between a Cash ISA (for flexibility) and a Lifetime ISA (for long-term goals). That way, you can benefit from both accessibility and the 25% government bonus on your LISA funds.

When can I withdraw funds from my Lifetime ISA?

You can withdraw funds from your Lifetime ISA at any time, but you can only withdraw penalty-free if you fall into one of these three categories:

1. You’re a first-time buyer purchasing an eligible property worth up to £450,000 and you’ve held your LISA for at least 12 months (that time starts ticking when you’ve deposited into the account)
2. You’re aged 60 or above
3. You’re terminally ill with less than 12 months to live

How long does a Lifetime ISA withdrawal take?

The Lifetime ISA withdrawal process typically takes a few weeks, depending on your provider and the type of withdrawal. If you have a Lifetime ISA with Tembo and you’d like to use it to buy an eligible property, we recommend giving 30 days’ notice to make sure your funds are released in time.

Once your solicitor has told us that you’d like to make a withdrawal, we’ll send you a Customer Declaration Form to complete, along with another form for your conveyancer. Your solicitor must then send the completed forms to us at savings@tembomoney.com.

We also require 30 days’ notice if you’d like to withdraw the funds for retirement, but in either case, it can take a little longer if you have any pending deposits or government bonuses.

If you’re making an ineligible withdrawal (before age 60, for something other than an eligible property), it can take 45 days for the funds to land in your account.

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

What is the 12-month rule for Lifetime ISAs?

The 12-month rule refers to the fact your Lifetime ISA must have been open for at least 12 months before you can use the money to buy your first home penalty-free. The clock starts from the date you make your first deposit into the account, even if it’s just £1.

So even if you think it’ll be a long time before you’re ready to buy a home, it can be worth opening an account with £1 today -  just in case your circumstances change and you’d like to buy a property sooner than expected. 

Can I cancel my Lifetime ISA within 30 days?

Yes. With a Tembo Lifetime ISA, you can cancel your account within 30 days of opening it without paying the 25% penalty. After 30 days, the standard government charge applies, and you can’t open another Lifetime ISA in the same tax year.

If you’ve opened a Stocks & Shares LISA, remember that investment values can fluctuate, meaning you could get back less than you originally paid in.

*Based on saving £100 at the beginning of each month for 5-years. Calculations show at month 61 (after 5-years) Tembo customers saving at 3.8% would have £390.68 on average more than saving with Barclays, HSBC, NatWest or Lloyds. Accurate December 2025.