Tax Features Of An Equity Release Mortgage

An Equity release is no more than a mortgage on your home that pays you for the equity that you have in your home when you reach retirement age. This is a very good way to increase the amount of money you get each and every month in your retirement. This will help greatly if your pension is not enough or if you did not save enough for a comfortable retirement.

The tax related benefits in a plan like this is well worth looking at. This alone can be a very good selling point for a plan like this. Not only will you enjoy the tax breaks, but your heirs will get some too.

Starting with the biggest tax benefit of all, any money that you get from a plan like this is considered to be tax free as it is only releasing money from your primary residence which does not attract taxation under UK Law. If you take the maximum amount of money at outset, it is possible release anywhere from £10,000 up to 50% + dependent on your age and property value.

Even if you are going to take the option that allows you to drawdown equity as and when you need it, the money you receive is still considered to be tax free. In fact it may also be possible to take an initial lump sum and also have a facility for equity release drawdown at a later stage.

For those receiving any means tested benefit from the government, you should note that if after drawing down a lump sum your combined savings are going to be more than £10,000 the pension credit, savings pension credit or council tax benefit may be affected.

As far as the benefits to your heirs, they could benefit by a reduction in the amount of inheritance tax that they pay. Because the property will be encumbered, there will be no inheritance tax on the amount that is borrowed against the property. If the remaining equity falls below the IHT threshold, it may even be possible to mitigate IHT all together.

This benefit will help greatly in many estates today. With increases in house prices over the last 10 years, property has significantly increased in price leaving many with a property value above the level where IHT is not payable. When it comes to paying inheritance tax, the Inland Revenue always wants their money, so being able to mitigate a potential IHT issue by using Equity release could be of great benefit to ones heirs.

As with all financial products, Equity Release Schemes have both pros and cons attached and should be considered carefully and preferably with the assistance of a suitable adviser. If you are age of 55 or over, own a home, and want to increase your income, this is well worth looking into.

By: equity

For additional details about home reversion plans Please click a link to obtain a free Equity Release Guide

Tags: equity, Features, Mortgage, Release