Martin Lewis warns UK households will lose £635 to HMRC in 'penalty'

The new Labour Party government can penalise people withdrawing their own cash from Lisas prematurely, Money Saving Expert founder Mr Lewis said.

Martin Lewis has issued a warning after UK households lose £635 to HMRC in a Lifetime ISA "penalty". The new Labour Party government can penalise people withdrawing their own cash from Lisas prematurely, Money Saving Expert founder Mr Lewis said.

BBC star Martin explained: "You can take the money out only for one of two reasons: number one, you are buying a first time property, you've never bought a property before, you've never owned a property before and that property has to be worth under £450,000.

"The second reason is you've hit age 60 and then you can take the money out and you get to keep the bonus. No one who has opened the ISA has hit age 60 yet because they haven't been around long enough.

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"It's a savings account. It's just a tax-free savings account, but the real key to it is the 25% state bonus. The problem with a lifetime ISA...the big one is if you take your money out for any other reason than to buy a first time qualifying property or at retirement effectively when you're age 60, you take a 25% penalty."

If you saved £10,000, you would receive a bonus totalling £12,500. Butupon withdrawal, you would incur a 25 per cent penalty, leaving you with a final total of £9,375 - £635 less than your initial investment, Mr Lewis went on to explain today.

He commented: "Now I don't have that much of a problem with that because that's to ensure that people are only using the LISA for the reasons intended. My issue is this: the LISA was launched in 2016. The property threshold limit in 2016 was £450,000 and it remains the same today.

"Many individuals, particularly in London, the southeast and other urban metropolitan areas, have been priced out due to rising house prices. They've saved as the government advised for their first property, but now their property is valued over £450,000. To withdraw the money, even to purchase a first-time property which is the purpose of this product, they face a significant penalty."