Equity release adviser Key Later Life Finance has called for an overhaul of the tax rules around property wealth gifting in the upcoming Budget, in order to help over-50s expand their support for first-time buyers.
Key Later Life Finance said intergenerational gifting, including more support for the ‘Bank of Family’ should be central to the Government fulfilling its housing objectives.
It urged Chancellor of the Exchequer Rachel Reeves to consider simplifying Inheritance Tax (IHT) rules on gifting, and specifically to address the seven-year clawback rule in relation to gifts from property wealth.
Key also warned against higher taxes on the wealth of older generations, as much of the wealth is being used to support younger generations.
Savills data showed that over-50s owned 78% of the UK’s property wealth, with over-65s holding £2.587tn net property wealth and 50 to 64-year-olds £2.213tn adding up to £4.8tn.
Outra data found that the median age of people most likely to move home was 52.5 years old, highlighting how younger generations struggle to move if they cannot get on the housing ladder to start with.
Key warned that the complexity of IHT rules is deterring over-50s homeowners, and over-65s in particular, from using their property wealth to fund deposits for first-time buyers and younger relatives.
It said the October Budget would be an ideal opportunity to simplify gifting rules and recognise the role of equity release and later life lending in redistributing property wealth and supporting intergenerational gifting.
Key urged the Government to remove the seven-year clawback rule – the potential for IHT penalties if gifts are given seven years before death – for gifts from property wealth using equity release.
There are also complex rules on gifting money for weddings and civil partnerships, with different tax-free amounts for children and grandchildren.
The Budget is a chance to simplify these rules, which also include having to declare gifts are being used for deposits by first-time buyers to support older homeowners giving money.
Will Hale (pictured), group director at Key Group, said: “The new Government has a real opportunity to better support the Bank of Family with its first Budget and make it easier for the older generation to gift property wealth which in turn would make a major difference to the UK housing market.
“The Government’s plan to build 1.5 million houses a year is very welcome but it also needs to ensure people can afford those homes.
“Recognition for the role of equity release by older family members in supporting first-time buyers and young families taking their next step up the housing ladder would give a significant boost to the later life lending sector and benefit the overall housing market.
“With the Prime Minister signalling that ‘those with the broadest shoulders should bear the heavier burden’ when it comes to addressing the economic challenges the country faces, there is clearly speculation that IHT tax rates and or threshold levels are set to change.
“Irrespective of where these decisions land, amendments to the seven-year gifting rule when it comes to IHT would be positively received by many and could encourage increased activity from the Bank of Family.
“In turn, putting more money into the housing market which would have numerous socio-economic benefits. “
