Make a move on assets

FIVE-MINUTE GUIDE TO... USING EQUITY RELEASE TO REDUCE IHT BILL

- By Harvey Jones

ASTHIS year's Budget looms, families are growing increasingly fearful that Chancellor Rachel Reeves will tighten inheritance tax (IHT) rules again.

Last year, she made unused pensions liable to IHT, in a move due to come into force in April 2027, and this year may bring other measures.

Potential changes include introducing a lifetime gifting allowance or extending the current seven-year exemption on tax-free gifts to 10 years or more.

Either move would drag more households into the IHT net.

Many are already exploring traditional strategies such as gifting, setting up trusts or taking out life insurance to cover future liabilities.

Another option, less well known, is using equity release to reduce the size of your estate.

Equity release lifetime mortgages allow older homeowners to unlock cash from their property without selling.

Interest rolls up and is repaid along with the debt when the homeowner dies or goes into care. Any surplus equity then returns to the estate.