Individual Savings Accounts

Treasury written question – answered on 28th March 2023.

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Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change), Shadow Minister (Climate Change and Net Zero)

To ask the Chancellor of the Exchequer, pursuant to the Answer of 18 November 2023 to Question 87713 on Individual Savings Accounts, if his Department will make an assessment of the potential merits of abolishing the 25 per cent penalty on removing savings from Lifetime ISAs in the context of the affordability of housing for first time buyers where (a) the Lifetime ISA limit has remained at £450,000 and (b) house prices have increased 24 per cent between December 2016 and December 2021.

Photo of Andrew Griffith Andrew Griffith The Economic Secretary to the Treasury

LISA funds, including any government bonus, can be withdrawn for the purchase of a first home valued under £450,000, in the case of terminal illness or from age 60. Withdrawals for any other reason are subject to a 25% fee to recoups the government bonus and any interest or growth arising from it.

Data from the latest UK House Price Index demonstrates that the average price paid by first-time buyers is below the Lifetime ISA property price cap in all regions of the UK except for Inner London, where the average price paid is affected by Boroughs with very high property values. The Office for Budget Responsibility is also forecasting for house prices to fall by 9% by the end of 2024.

The Government keeps the operational aspects of the Lifetime ISA under review, as it does all aspects of the tax system, with any changes being announced at a fiscal event.

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