Do You Pay Tax on Equity Release?

Malcolm

Okay, Dan so we have got another question to pick up on here is, do you pay tax on equity release?

Dan

No. No. One of the fundamental things about equity release is that it’s a tax free lump sum, or a tax free series of small lump sums.

There's no income tax to pay on it and there's no capital gains tax to pay on it either.

You do need to be aware that if you put any money in savings or an investment that you've released then the income on that would, of course, come under your normal income tax rates.

On that side of things, it's more likely to have an effect if you're receiving benefits or funding for care.

So, equity release can have a detrimental effect on the intensive benefits.

But again, with careful planning with a qualified advisor, should be able to mitigate that and allow you to take money in smaller amounts, so it doesn't breach the thresholds of affecting that.

On the other side, more relating to tax, independent financial advisers are finding quite a lot now that using equity release can help with inheritance tax planning and that's something that we are very happy to work alongside someone's independent financial adviser.

Maybe someone who's managing their pensions, later life planning in terms of income to help mitigate some of the inheritance tax there.

Malcolm

I know we have a problem with raising money on mortgages to pay tax bills in the normal mortgage world.

So, have you ever come across that where people are enquiring about raising capital on equity release basis to pay a tax bill, for example, a capital gains tax bill.

Dan

Yes. So as long as the bill is not in a serious default Equity can hopefully be used for any legal and moral purpose.

Malcolm

Okay, can’t be more moral than paying your tax bill. Thanks, Dan.

Dan

Alright. Bye bye.