Will I Have To Pay Tax On The Equity Release Proceeds?
Any cash released via an equity release scheme is classed as a release of capital and therefore not subject to the UK tax regime. However, if the proceeds are placed into a UK bank account or invested into a pension annuity, any income derived could be liable to income tax. In turn any income from such savings or investments could also directly affect means tested benefits such as pension credit or council tax reduction.
One further area where lifetime mortgage & home reversion plans and taxation can intertwine is on the subject of inheritance tax. Taking an equity release mortgage can actually reduce any future inheritance liability by reducing the overall size of the net estate. However, this is not the only method of reducing inheritance tax and always seek specialist advice in the area beforehand.