Inheritance tax: Britons could slash bill ‘completely’ using their home – check now

Inheritance tax explained by Interactive Investor expert

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Those hoping to rid themselves of inheritance tax liabilities may consider the idea of a lifetime mortgage. A lifetime mortgage, otherwise known as equity release, involves releasing the money tied up in the value of a property in the form of a loan. spoke exclusively to Katie Brain, Banking Expert at Defaqto, who offered insight into the matter.

She said: “Property prices have risen significantly in the last year or so, which could mean more potential to release some of the equity in your property.”

Ms Brain has explained the equity released can then be used for whatever a person so chooses.

For example, some may wish to use it for home improvements, clearing outstanding debts or helping out the family.

Others could decide to take a holiday abroad after a tumultuous two years of the pandemic. 

However, equity release is not always solely for providing extra cash.

Instead, according to the expert, it may also have a win-win impact for tax purposes.

Inheritance tax is loathed by millions, and reducing one’s bill legally is a major preoccupation for many.

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Ms Brain suggests equity release could hold the key to solving this issue.

She continued: “Equity release can also be a useful product to consider when reviewing your estate for inheritance tax planning.

“Releasing equity in your home would reduce the value of your property.

“It would either reduce the inheritance tax bill upon death, or the estate may fall under the threshold completely, provided the equity released is spent and not invested.”

When it comes to equity release, many people may choose this option in order to provide financial assistance to family members.

However, Britons should be aware of the implications of gifting this released cash.

Ms Brain added: “If the equity release is gifted to others, this will be exempt from inheritance tax.

“This is provided you live for seven years from the date of the gift.”

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However, inheritance tax planning as well as equity release can often be complicated.

For equity release, individuals will need to consult an advisor to find out whether this is right for them – as it is not a suitable option for everyone.

Taking out equity release can be a major decision, as it involves securing a loan against a property, and the interest can grow.

It must be repaid if a person dies or sells their home to go into long-term care. 

Inheritance planning matters are also difficult to navigate alone, and Ms Brain also suggests seeking financial advice.

These professionals can help Britons to understand the best solution for their individual circumstances. 

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