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Equity Release

Learn More About Equity Release Options

Equity Release mortgages are not like residential mortgages. They help you secure a loan against the value of your property. In these guides we outline what makes them different, the eligibility criteria and help you decide if it’s an avenue you would like to pursue. It’s a way to free up money in your later years, but with many factors influencing the loan, it’s good to learn as much as you can from qualified mortgage professionals.

Posted On: August 20, 2021
Updated On: January 16, 2023

Do You Pay Tax On Equity Release?

No, you don’t pay tax on equity release. Getting a tax-free lump sum of cash is certainly one of the pros of releasing equity on your property as an extra income. However, whilst you won’t have to pay tax, you will have to pay interest. This interest will compound over time, so could significantly reduce the value of your home.

But that’s where no-negative equity can come to the rescue. All Equity Release Council plans offer protection. Should the combination of your loan value and interest exceed the value of your property, you and none of your beneficiaries will be expected to pay the outstanding amount – it will simply be written off.

Why do you not pay tax on equity release?

As you’re borrowing money against the value of your home, there is no capital gain. You pay tax on job income because that’s coming from outside your current capital and assets.

If you want access to a decent income boost in one go, equity release can be a suitable option to achieve this. You can unlock wealth from your property completely tax-free and spend it how you wish.

In fact, it’s recommended that you spend rather than save money generated from equity release, as any interest on equity-related savings could become taxable.

What about inheritance tax?

If the entire value of your property is locked into your equity release plan, and you take the full amount, then you will no longer own the property and therefore have no inheritance tax payable. However, if you ring-fence a portion of the property, the inheritance tax will be payable on that portion, but it will obviously be significantly reduced compared with paying inheritance tax on the entire property.

We hope this guide on whether you pay tax on equity release has been helpful.

If you’re looking to speak to an equity release mortgage advisor, Agentis can help. As ‘Whole of Market’ mortgage brokers, we can find the most suitable package for your circumstances. Contact us today to arrange a free initial consultation.

*Equity release is not right for everyone and may reduce the value of your estate.