HMRC warning to UK households who have a home worth £450,000 or more
HMRC is slapping people in homes over £450,000 with cruel penalty charges. The total value of Lifetime Isa withdrawal charges rose by 40 per cent in 2023-24 to £75.2 million in 2023-24, according to new figures released by HMRC.
The total value of withdrawal charges in 2023-24 was £75,272,000, up from £54,328,000 in 2022-23. Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, the investment platform, said: “The Lifetime Isa is proving hugely useful, with almost 57,000 people using one to help them get that all-important first step on the housing ladder in 2023-24."
A 25% government penalty applies if you withdraw money from a Lifetime ISA for any reason other than buying your first home (up to £450,000) or for retirement, and you may get back less than you paid into your Lifetime ISA.
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Ms Morrissey went on and said: “However, there’s massive room for improvement, as around 100,000 people made an unauthorised withdrawal from their Lisa during the same period and got clobbered with a withdrawal penalty.”
She added: “It’s clear the Lisa has huge potential to help people meet their home-owning and retirement needs but reform is needed.” Ms Morrisey said: “This not only acts as a disincentive for those saving for their first home but also those who want to use it to save for their retirement.
"This is particularly the case for groups such as the self-employed with variable earning patterns who may prefer the flexibility of the Lisa over a pension.” BBC and ITV star Martin Lewis said on his weekly podcast this week that the penalty paid for non-approved withdrawals from Lisas could be £635.
A Cash Lifetime ISA is an individual savings account that’s designed to help people save for their first home, or for retirement. That’s because the government gives you a 25% bonus on top of any money you save. You can save up to £4,000 each tax year into a Cash Lifetime ISA – so, for every £4 you contribute, you’ll get £1 for free.