HMRC issues 'charge' to people who've withdrawn their own money

HMRC issues 'charge' to people who've withdrawn their own money

Under the Lifetime ISA rules, savers risk a fine and charge of up to an eye-watering £11k as the Cost of Living crisis up and down the country.

by · Birmingham Live

HMRC is issuing a "charge" to people who take out their OWN MONEY from a bank account. Under the Lifetime ISA rules, savers risk a fine and charge of up to an eye-watering £11k as the Cost of Living crisis up and down the country.

According to new figures obtained by a Freedom of Information (FOI) request by the money app Plum, around 74,000 people were penalised for accessing their lifetime ISA in 2022-23. The average of the top 25 penalties paid for unauthorised withdrawals was £11,000.

The average top 25 withdrawals made sat around £44,000. Around 16,000 savers were forced to hand back £1,000 or more, over 6,100 savers were hit with penalties of £2,000, while 851 potential homebuyers were fined £5,000.

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LISAs are designed to help people aged 18 to 39 buy their first home or, much less popularly, to save for retirement. Savers get a 25% government boost when they use the funds to buy a qualifying first home. Money Saving Expert explains: "They're a powerful product – still beneficial to many – which can give a huge boost to first-time buyers' savings."

Rajan Lakhani of smart money app Plum said: "The Lifetime ISA is a powerful weapon for first-time buyers looking to build a deposit, but there is a growing consensus that some of the rules introduced in 2017 are starting to look a little outmoded. House prices have risen – but policy has not caught up.

"The Chancellor has put home ownership at the centre of the Labour party’s programme for government. That’s why it makes sense to index-link the Lifetime ISA ceiling from the time of its launch and bring in a new limit closer to £600,000. Young people trying to get a foot on the housing ladder have enough challenges already without having to worry about potentially losing a chunk of their hard-earned savings.”