HMRC sending out £11,000 fines but they could be rescinded under Labour

The new Labour Party government could reportedly scrap the penalty, which costs £11,000 for some couples and first-time buyers, in the Autumn Budget.

A Lifetime ISA warning has been issued as savers are penalised by as much as £11k each for taking out their OWN cash. The new Labour Party government could reportedly scrap the penalty, which costs £11,000 for some couples and first-time buyers, in the Autumn Budget on October 30.

The average of the top 25 withdrawals made was £44,000. Figures were rounded to the nearest £1,000. Data released to Plum by HMRC under Freedom of Information (FOI) rules showed that in 2022-23 15,977 savers had to hand back £1,000 or more in penalties.

Currently, if a Lisa saver buys a home above the £450,000 limit or needs to access their savings for any reason other than buying a home, they face a hefty 25% penalty fee. This penalty can result in savers losing not only the Government bonus that comes with Lisas but also a significant portion of their own savings.

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Some 6,139 savers were hit with penalties of £2,000-plus, while 851 were hit with penalties of £5,000-plus. The 25% unauthorised withdrawal charge strips out not only the government bonus that comes with Lisas but also removes a chunk of savers’ cash.

Rajan Lakhani, a spokesman for Plum, which expects to launch a Lisa soon, said: “These findings show how the current ceiling is shutting people out of the housing market. There are currently dozens of local authorities across the country where the average house price is greater than the £450,000 cap, and that number is only set to rise in the future.

“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.”

Mr Lakhani added: “The upcoming Budget offers (Chancellor) Rachel Reeves the perfect opportunity to fine-tune the current Lisa rules so young families can realise the dream of home ownership sooner. Even losing a sum of £1,000-£2,000 can be a major setback for a young couple shopping for their first home. It represents the cost of a home survey, or your removal fees.

“Buying a first home is a huge decision, and the market has moved significantly since 2017. House prices have risen – but policy has not caught up. Moreover, the high financial pressure of renting has made it difficult for people to save for their first homes…

“By raising the property price limit to a more equitable £600,000, Rachel Reeves can empower first-time buyers to buy the properties they actually need without fear of being penalised.”

A Treasury spokesperson said: “Decisions on tax are made in the round at the Budget. Across the vast majority of the country the average price for a first-time home remains below the £450,000 Lifetime Isa cap, and we are committed to building 1.5 million more homes so that people can turn the dream of owning a home into a reality.”