Do you pay tax on equity release?

Short answer:

No. Equity Release Plans (also known as Lifetime Mortgages) are not liable for tax.

Longer answer:

Lifetime Mortgages do not attract tax because they are a type of (long-term) loan.
However, you might take a lump sum equity release plan and place it in a savings account. As a result of this, you will accue interest. This interest could attract tax, if it exceeds your Personal Savings Allowance. If you reach your Personal Savings Allowance limit, you can protect your remaining savings from tax up to the maximum ISA allowance.

There is another factor which can affect the value of the cash release through Equity Release; the difference between the interest cost of the Lifetime Mortgage and the interest earned in a savings account. If you were to take a lump cash sum Lifetime Mortgage you will attract interest costs on this at a higher rate than you will gain in a savings account. (Especially in 2020). Different Equity Release Plans may help you avoid this drain of value – such as a drawdown agreement.

Talk to us about all the options. Our free initial consultation is free. Contact us today.

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