Equity release allows homeowners to unlock the value of their property without having to sell or move.

Whether you’re looking for a lump sum or regular payments, it’s natural to wonder if there are any tax implications. The good news is that the money you release is not classed as income, meaning it is generally tax-free. However, depending on how you use the funds, there could be other financial considerations to keep in mind.

In this guide, we’ll explore how equity release in Bristol works, whether any tax applies, and what to consider before making a decision.

What is equity release in Bristol and how does it work?

Equity release in Bristol allows homeowners aged 55 and over to unlock tax-free cash from their property without having to sell or move.

The most common types of equity release are lifetime mortgages, where you borrow against your home while retaining ownership, and home reversion plans, where you sell a portion of your property in exchange for a lump sum or regular payments.

The loan, plus interest (if applicable), is typically repaid when you pass away or move into long-term care, with the funds coming from the sale of your home.

Do you pay tax on equity release in Bristol?

The money you receive through equity release in Bristol is not classed as income, meaning it is not subject to income tax.

Whether you take a lump sum or regular withdrawals, the funds are considered a loan rather than earnings.

However, depending on how you use the money, there may be other tax considerations, such as inheritance tax or capital gains tax, which should be carefully planned with professional advice.

Are there any tax implications when using equity release funds?

While the money you receive by releasing equity is tax-free at the point of withdrawal, using it in certain ways could have tax implications.

For example, if you invest the funds and generate income, you may be liable for income tax on any returns.

Similarly, if you gift money to family members, it could count towards your estate’s value for inheritance tax purposes if you pass away within seven years.

Speaking to a financial expert can help you understand any potential tax consequences.

What can I use equity release funds for?

Homeowners choose equity release in Bristol for a variety of reasons, including:

  • Home improvements – Renovating or adapting your home to suit your needs.
  • Clearing debts – Paying off outstanding loans, credit cards, or an existing mortgage.
  • Supplementing retirement income – Boosting your pension funds for a more comfortable lifestyle.
  • Helping family – Providing financial support, such as helping children or grandchildren get on the property ladder.
  • Travel and leisure – Funding holidays, hobbies, or personal interests.

Since the money is yours to use as you wish, it’s essential to consider how best to manage it to suit your long-term financial goals.

Are there alternatives to equity release in Bristol?

While equity release in Bristol is a popular option, it’s not the only way to access property wealth. Alternatives include:

  • Downsizing – Selling your current home and moving to a smaller, more affordable property.
  • Remortgaging – Switching to a new mortgage deal that allows you to release funds.
  • Retirement interest-only mortgages – A mortgage designed for older borrowers where you only pay the interest, with the loan repaid when you sell the property.
  • Using savings or investments – If you have other financial resources, these may be a better option before committing to equity release.

A mortgage broker in Bristol like us can help you compare these options and determine the best financial solution for your situation.

How a mortgage broker in Bristol can help with equity release

Deciding whether equity release in Bristol is right for you requires careful consideration of your long-term financial plans.

A mortgage broker in Bristol can assess your situation, explain your options, and help you find the most suitable deal.

They can also explore alternatives, ensuring you make an informed decision. With expert guidance, you can navigate the process with confidence, knowing you’ve chosen the best solution for your needs.

Date Last Edited: March 6, 2025