Martin Lewis has urged people with a particular type of ISA to not put another penny into it before Wednesday’s Budget. Chancellor Rachel Reeves is expected to make to the tax-free savings and investment accounts when she unveils her long-awaited plans.

Rumours have swirled that she may reduce the tax-free amount people can put into their cash ISAs, or try and encourage people to invest more using a stocks and shares ISA. However, Mr Lewis was discussing the Lifetime ISA (LISA) on his podcast.

The LISA allows people aged between 18 and 39 to to save for a first-time home worth no more than £450,000. You can invest up to £4,000 a year until you are 50 and the Government will give you 25 per cent on top of everything you pay in.

If you withdraw your money before you turn 60 for anything other than buying a first home, you will be charged a 25 per cent Government penalty – which may leave you with less than you have paid in. Others choose to take the money at 60 to help with retirement.

Mr Lewis received a call from Theo, who asked if it was worth him maxing out his LISA every year when he hoped to buy a flat in London in around three years’ time with his partner. Rightmove claims The majority of properties sold in London during the last year were flats, selling for an average price of £536,666.

Theo feared that he may up spending more than that buying his flat, meaning the LISAs he and his partner have would be useless as they exceed the £450,000 threshold, meaning they would be susceptible to the 25 per cent Government penalty.

When asked what he should do, Mr Lewis answered: “Absolutely, I would not be putting another penny into a Lifetime ISA until this Wednesday because I would say there is a plausible possibility that we will see a change to the Lifetime ISA in the Budget on Wednesday.

“Now, I have evidence to the Select Committee talking about Lifetime ISAs earlier in the year. They have reported to the Chancellor that they think there are some problems in the Lifetime ISA. One of them is that the threshold has not been increased since 2017, even though house prices have gone up. So, on the back of that and the work I have been doing, I think there is a 50-50 chance of one of two things happening in the Budget this year.

“Either the Chancellor will follow my recommendation, which I would like her to, which is if you buy a proper house over £450K, then the penalty for withdrawing your money that you normally pay when not buying a qualifying property (would go). You would not get your bonus, but you would get your money back. That is my suggestion.

“The alternative is that she wants the threshold up. Now I think there is more of a chance of that, maybe going up to £500,000 £550,000 or £600,000 – I think there is more of a chance of that because it is simpler, you can do that at the stroke of a pen. Changing the penalties is slightly more technical. You never know, we could get both.

“The first thing I would say is don’t do anything now. I’m not saying it will change, I am not privvy to that information, but I think it is strongly possible that something happens.”

Mr Lewis added that it was still worth Theo’s partner opening up a LISA and putting a pound in before her 40th birthday, simply to give her the option of using it in future once she has turned 40.

That would mean that, if the threshold goes up or the penalty is removed – or both – she already has a LISA openand activated which she can still use to buy a property.