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In order to help savers withdraw funds for a purpose other than house purchase, the government have reduced the Lifetime ISA (LISA) withdrawal charge from 25% to 20%.

This new charge applies from 6 March 2020 until 5 April 2021 and is designed to help savers who have been affected by the coronavirus. If the withdrawal is for a first time house purchase or due to terminal illness, the penalty will not apply.

The decreased charge means that investors will only lose the government bonus on the amount they withdraw. For example, if they withdraw £1,000, the value of their LISA will reduce by £1,250 and the LISA provider will pay back the bonus of £250 to HMRC.

The government is updating their LISA digital service to reflect the change. LISA managers who have deducted a 25% withdrawal charge since 6 Match 2020 will be able to correct this when the service is updated.

For help and advice with savings and investments, contact Chris Slatter on cslatter@ellacottswealth.co.uk or 01295 250401.