Changes to inheritance tax could damage equity release industry

Permalink: Changes to inheritance tax could damage equity release industry
by Kay Murchie

In the Pre-Budget, Chancellor Alistair Darling said that that most families will avoid paying anything on the first £600,000 and married couples, including those in civil partnerships, will be able to combine their individual £300,000 allowances.

Equity release gives people access to the value they have built up in their home for their own use and is a choice for many looking to maintain or create a better lifestyle or to meet an unexpected financial need.

However, the changes could prove harmful to equity release schemes and has caused concern among providers according to property specialists Savills.

Lucian Cook of Savills said I suspect you will find some of the pressure is off on equity release, because one of the main reasons you were going to enter into an equity release product and one of the key drivers for downsizing is going to be inheritance tax. Increasing property prices have driven a growing number of people toward higher levels of inheritance tax in the last few years.

Mr Cook continued that you have this considerable amount of people who are liable to inheritance tax upon their death on their main house and one of the ways that they could have got around that was to enter into an equity release scheme, take some capital upfront on the house and pass it down to the children who many need the money.

However, the pressure to enter an equity release scheme may now have been lessened. Mr Cook continued if you’ve effectively doubled your nil rate and you can continue in occupation of the premises without a considerable inheritance tax bill, then one of the main pillars behind equity release has been removed.