It is far from clear exactly what the tax implications and measures of the new coalition Government may mean for the Equity Release market however there is one particular point which has been made clear before the emergency budget which is awaited in June.
The rate of Capital Gains Tax on second properties has been raised to 40%, now the absolute detail of this is yet to be confirmed, what cannot be denied is that this decision has caused widespread concern within those close to or at retirement age. The reason that this tax change is of particular interest to this particular group is that over the last 15 years many people have lost confidence in pension schemes and in many instances have invested what has historically entered these funds into purchasing second, third or ever more properties to fund their retirement. That the sale of these properties will now incur a tax liability of 40% of profit made will make a huge difference to the amount of capital expected to be realised. The reason this has a relevance to the Equity Release industry is that the question of whether to release capital from a residential property in this form needs to be considered prior to selling an Investment property.
As with all Equity Release Schemes the absolute key is to take specialist, professional IFA advice prior to making any decision. This whole question of tax changes and how individuals generally and those in retirement specifically deal with them is becoming ever more important. What the Equity Release industry needs to do is to make sure that it is an option that is always considered not only as a fix for retirement income gap but also in holistic financial and taxation planning. As always Equity Release is not the answer for all people in all situations, it is however an ideal solution in many situations. It is the job of the Equity release Industry to make certain that the option is always considered.
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