HMRC Updates: Conveyancer Lifetime ISA First-Time Buyer Guidance Revised

• HMRC has updated its model investor and conveyancer declarations for Lifetime ISA property purchases.
• From October 29, 2026, a 20% withdrawal charge will apply if LISA funds are used for a property exceeding £450,000.
• Conveyancers must ensure property purchases complete within 90 days of receiving LISA funds or request extensions.
• HMRC can request information from 'relevant persons,' including conveyancers, regarding LISA withdrawals, with penalties for inaccuracies.
• Any interest earned on held LISA funds must be paid to the investor, not the ISA manager.

Strict adherence to the 90-day completion timeline and the established extension procedures is paramount to avoid potential penalties and ensure proper advice is given to first-time buyer clients.

Conveyancers advising first-time buyers utilizing a Lifetime Individual Savings Account (LISA) for residential property purchases must be aware of recent updates to HM Revenue and Customs (HMRC) guidance. These revisions specifically include new versions of the model investor declaration and the model conveyancer declaration, which are crucial documents in the process of releasing LISA funds. The updated guidance aims to streamline the procedures and clarify responsibilities for all parties involved in these transactions.

A significant change impacting future transactions concerns the property value threshold for LISA withdrawals. Effective from October 29, 2026, any withdrawal of LISA funds for a property purchase where the price exceeds £450,000 will incur a 20% withdrawal charge. This new limit is a critical consideration for conveyancers when advising clients on their property acquisition strategy, particularly for those planning purchases in the coming years. The core conditions for using LISA funds, established since April 6, 2018, remain that funds, including any government bonus, can be applied towards a first-time residential purchase.

The process for releasing Lifetime ISA funds for a property purchase involves specific declarations and strict timelines. Conveyancers are required to submit particular information to the LISA manager to facilitate the release of funds. This includes an updated model conveyancer declaration, which contains mandatory text. Similarly, the investor must provide specific details to their conveyancer, documented through an updated model investor declaration. Once the ISA manager receives the necessary declaration, they are expected to process the request, deduct any applicable withdrawal charges, and disburse the funds to the conveyancer within 30 days.

A key regulatory requirement for conveyancers is ensuring the property purchase is completed within 90 days of receiving the withdrawn LISA amounts. Should the sale not finalize within this timeframe, conveyancers must notify the LISA manager within 10 business days following the expiry of the 90-day period, providing relevant information. In such cases, the full amount originally withdrawn must be returned directly to the ISA manager. Any shortfall in the returned sum will be treated as a withdrawal and subject to the standard withdrawal charge. Furthermore, any interest accrued on the funds while held by the conveyancer should be paid directly to the investor, not the ISA manager, as it does not originate from the LISA itself and is not subject to withdrawal charges.

For transactions that face delays, the guidance provides a mechanism for extension. If a property purchase is progressing but is not anticipated to complete within the initial 90-day window, conveyancers can request a 60-day extension from the ISA manager. If further time is needed, an additional 30-day extension can be sought. ISA managers are obligated to report all such extensions to HMRC. An exception to the immediate occupation rule applies to Crown servants serving overseas, or their spouses or civil partners; if they cannot occupy the property as their main residence at the time of acquisition, they must demonstrate an intention to occupy it in the future. It is also important to note that if an investor holds both a Lifetime ISA and a Help to Buy ISA, they are only permitted to utilize the government bonus from one of these accounts for their first home purchase.

Conveyancers play a pivotal role in ensuring compliance with Lifetime ISA regulations, and HMRC maintains significant oversight powers to uphold these rules. HMRC possesses the authority to demand information from any 'relevant person' concerning a Lifetime ISA withdrawal and can also inspect pertinent documents. The definition of a 'relevant person' is broad, encompassing any individual who may have received all or part of a withdrawn LISA amount, which explicitly includes conveyancers.

The importance of accurate and timely responses to HMRC's information notices cannot be overstated, as penalties can be levied for any inaccuracies. This underscores the critical need for conveyancers to meticulously review and adhere to the updated HMRC guidance, particularly regarding the revised model declarations and the new £450,000 property value threshold for Lifetime ISA withdrawals effective October 2026. Strict adherence to the 90-day completion timeline and the established extension procedures is paramount to avoid potential penalties and ensure proper advice is given to first-time buyer clients.

Conveyancers must review the updated HMRC guidance, particularly the revised model declarations and the new &450,000 property value threshold for Lifetime ISA withdrawals effective October 2026, to ensure compliance and properly advise first-time buyer clients. Strict adherence to the 90-day completion timeline and extension procedures is critical to avoid penalties.

Source: Original reporting via GOV.UK guidance