LISA withdrawal charges top £33m while cash ISA subscriptions plunge

LISA withdrawal charges amounted to over £33m in the 2021/22 tax year, according to new data from HMRC.

The last two tax years saw charges more than triple compared to those levied in 2019/20. In 2018/19 and 2019/20, the withdrawal charges were set at 25% before they were dropped to 20% from 6 March 2020 to 5 April 2021 to help people impacted by the pandemic to access funds. However, the 25% charge is now back in place.

Quilter tax and financial planning expert Shaun Moore said: “These stark figures illustrate how many people were still struggling to pay bills last year and have decided to stomach the 25% charge just to get their money out. This also points to the LISA being an ultimately flawed product that needs a serious rethink. The covid crisis should have taught us that in times of financial hardship we should not be penalising people for using their savings to keep their heads above water. But with more people than ever struggling with their finances, we are back to penalising savers who simply can’t predict their financial future and now dealing with huge energy and food bills.”

Approximately 12 million adult ISA accounts were subscribed to in the 2020-21 tax year, down from 13 million in 2019-20.

The number of cash ISAs subscriptions fell by 1.6 million compared to 2019-20, while the 940,000 junior ISAs were subscribed to in the same period, the ninth full financial year since the scheme was launched, down from 1 million in 2019-20.

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