Lifetime ISA - early withdrawal penalty

Scubar

Hi, I’ve opened a LISA with the intention to use it to buy a home with my partner, but for various reasons, that’s not now going ahead. As some of the money was shared, I need to give it back.

Should I wait until the bonus has been paid (next month), and once the money has been withdrawn, and penalty charge made, can I keep using the LISA and receiving a bonus, or is it a 1st time only thing? I’ve not managed to find an answer to that yet.

Alexland

You can make a partial withdrawal (before or after the bonus is added) and would only pay a 25% penalty on the withdrawn amount which might be less than the total bonus added on the whole account. You can then continue to hold and add to the LISA in future subject to the £4k per tax year contribution limit.

However are you sure there are not better ways of returning the money such as a 3% personal loan which would enable you to maintain your LISA account valuation and bonus? When trying to buy a property in future you might be glad to have made the most of the LISA opportunity each tax year.

Alex