The government should look at “simplifying” Inheritance Tax (IHT) rules on gifting to help more younger homeowners, a firm has said.
Equity release adviser firm Key has said that changing IHT rules in the upcoming Budget, specifically the seven-year clawback rule on gifts on property wealth, would foster more intergenerational lending through the Bank of Family.
The firm added that IHT should be removed for gifts from property wealth using equity release as it would support more family investments.
The company added that it would help the government fulfil its housing objectives of 1.5 million homes in the next five years.
Key added that higher taxes on the wealth held by older generations may be counterintuitive as much of this is used to help younger generations.
The company said that data shows over-50s own 78% of UK property wealth and as a group hold £4.8trn in property wealth. This is split with the over-65s holding £2.6trn of net property wealth and 50 to 64-year-olds maintaining around £2.2trn.
This bracket is also most likely to move house, with the average age for a house move coming to around 52-years-old.
Complex rules deters deposit transfers
Key said that the “complexity of IHT rules” was deterring over-50s homeowners from using property wealth to back first-time buyer deposits of younger family members.
The company said that the 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”.
Figures from Legal and General show that the Bank of Family is expected to fund around 42% of UK property purchases for under-55s.
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.”
He continued: “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.”
Anna is currently the deputy editor for Mortgage Solutions and editor for Specialist Lending Solutions. She has worked as a journalist since 2019, having secured her Gold Standard NCTJ diploma from News Associates in a fast-track six-month course.
She started her career as a report at specialist publication The Insurance Insider covering a wide range of areas before joining Mortgage Solutions and Specialist Lending Solutions in 2021.
In her role, she helps put together and structure the news agenda for the day and writes up press releases, reports, interviews, analyses and exclusives across both titles. She also commissions blogs for Specialist Lending Solutions and hosts online masterclasses and in-person events across the business.
She has been shortlisted for three journalism awards, which include BIBA Journalist and Media Awards Scoop of Year Award in 2020, Headline Money Mortgage Journalist of the Year Award (B2B) in 2022 and 2023.
Prior to being a journalist, Anna worked in ecommerce across Snow + Rock, Cycle Surgery and Runners Need websites, and before that worked at specialist financial PR firm Rostrum.
In her spare time, Anna enjoys reading, seeing live music, and cooking for friends and family. When she gets a chance, she also enjoys hiking, skiing and indoor rock climbing.
