He has long called for change on the growing problem
Martin Lewis has pledged to keep fighting an ‘unfair’ penalty(Image: ITV)
Martin Lewis has slammed a “manifest injustice” as savers face a hefty penalty charge. He vowed to continue battling the policy regardless of who becomes the new Prime Minister, whether it’s Andy Burnham or another person.
He made the remarks about the 25 per cent penalty on his BBC podcast, calling for the HMRC policy to be overhauled. A listener rang in with a query as they were considering purchasing their first property using money from their cash Lifetime ISA. You can put in up to £4,000 each tax year into a Lifetime ISA (LISA) and receive a 25 per cent government bonus on any contributions, meaning you can secure up to £1,000 in bonus money. The money is intended to be used either towards your first property or accessed once you reach 60, otherwise you must pay a 25 per cent penalty when withdrawing.
A growing problem
The purpose of this 25 per cent charge is to recover the government bonus, but it also eliminates any interest earnings or investment gains, and effectively removes 6.25 per cent of your initial deposit. In an increasing number of instances, you might have to pay the penalty even when using the money for your first property.
This is because you can only use your LISA savings towards a first home up to the value of £450,000. Prospective buyers looking to purchase in pricey areas such as London are being stung by this charge, despite having saved into their LISA with the honest intention of using the funds for their intended purpose – buying a first home.
Uncertain times ahead
Mr Lewis has been a persistent critic of the property cap, calling for it to be reformed. The future of the Lifetime ISA is very much uncertain.
At the Autumn Budget, Labour proposed introducing a new savings product for first-time buyers to replace the Lifetime ISA. Now with a new Prime Minister soon to come in and potentially a new Chancellor to take over from Rachel Reeves, further changes could be on the way.
Regardless of what transpires, Mr Lewis pledged to continue his campaign against the property cap charge. He said: “I will continue to be lobbying on this issue because I think it’s a manifest unfairness, for first-time buyers who are buying a first-time property with a first-time property ISA, that they have to pay a penalty for doing so. I don’t think that penalty should be there.”
‘It hasn’t happened’
This podcast episode was recorded and Mr Lewis made these comments on the day of the Makerfield by-election, before Mr Burnham was elected as the new MP for the area and prior to the PM announcing his resignation. Mr Lewis told listeners about his previous attempts to change the policy.
He said: “I’ve been campaigning to get it so that at least if you’re buying your first time property and it’s above £450,000, while you might not get the 25 per cent bonus, you shouldn’t have the penalty for using it. I thought I’d got it with Jeremy Hunt first and then I thought I’d got it with Rachel Reeves, and it hasn’t happened.”
