Do You Pay Stamp Duty on Equity Release?

If you're contemplating releasing equity from your home, you're going to need to know all the costs that are involved to make your decision. Not many people have prior experience of equity release. If you compare the costs of releasing equity to buying a home, one of the costs you may be wondering about is stamp duty. Do you pay stamp duty on equity release? The simple answer is no because you're not acquiring land or property. In fact, you may be doing quite the opposite. 

In this insight, I'll explain why that is and how you can take the next step forward with releasing equity.

Key Takeaways

• You do not pay stamp duty on equity release because it does not involve buying or selling property; it's typically a loan or selling part of your property.
• Stamp duty is a tax associated with property transactions, and it's only applicable when you acquire first or additional properties.
• If you use released equity to buy another property, you may be subject to stamp duty on the new property acquisition, but it's a separate transaction from the equity release itself.
• Stay informed about potential changes in regulations regarding equity release and stamp duty, as rules and laws can evolve over time. When considering equity release, seek professional advice and thoroughly understand the process and eligibility criteria.

Do You Pay Stamp Duty on Equity Release?

No, you don't pay stamp duty when on equity release because it doesn't involve buying or selling property. When you complete equity release you are actually taking a loan, or selling part of your property. None of these transactions involve paying stamp duty. 

Stamp duty is a tax that is typically paid on the transfer of property or land ownership. It is a tax that is commonly associated with property transactions, such as when buying a house or land.

Equity release, on the other hand, is a financial product that allows homeowners, typically those who are retired, to release some of the equity tied up in their property without having to move out. It can be done through methods like a lifetime mortgage or a home reversion plan.

However, it's essential to note that the rules and regulations regarding stamp duty can change, and if the government were to introduce a tax for selling property, the rules around equity release and stamp duty may change. 

Why Don't You Pay Stamp Duty On Equity Release?

You don't pay stamp duty on equity release at present because you are not buying land or property. Only property transactions where you acquire a first or additional property require a stamp duty payment.

When Do You Pay Stamp Duty On Equity Release?

You would generally only pay stamp duty on equity release if you release equity from one property (which is usually tax-free) to purchase another property, which may indeed require you to pay stamp duty on the new property acquisition.

Let's say you own a home (Property A) and decide to release equity from it through an equity release scheme. This process usually doesn't incur stamp duty because you're not selling or transferring ownership of Property A.

However, you use the released equity to buy a new property (Property B). Since you're purchasing Property B, you would typically be subject to stamp duty on the value of Property B, just like any other property buyer. This is because the purchase of Property B is a separate transaction from the equity release on Property A, and stamp duty is usually applicable to property acquisitions.

Future Regulatory Changes to Equity Release and Stamp Duty

When you're thinking about tapping into your home's equity, it's vital to look ahead. Changes in rules and laws could affect how equity release works, as well as how much you pay in taxes. The financial and property rules can change over time, which might alter how much equity release costs you. Stay updated and consider these potential changes when making financial decisions.

How To Get Started With Equity Release

Getting started with equity release is a significant financial decision that can provide you with access to the equity tied up in your home. This can be a valuable source of funds for retirees or those looking to enhance their financial situation. However, it's a complex process that requires careful consideration and professional advice. Here's a step-by-step guide on how to get started with equity release:

• Understand What Equity Release Is: Begin by educating yourself about what equity release entails. It's a financial product that allows homeowners aged 55 and older to access the wealth tied up in their property without having to sell it. Equity release options typically come in two main forms: lifetime mortgages and home reversion plans. Each has its own features and implications.

• Determine Your Eligibility: To qualify for equity release, you need to meet certain criteria, including your age, property value, and location. These criteria may vary among different equity release providers. Ensure that you meet these requirements before proceeding.

• Research Equity Release Providers: Explore various equity release providers in your region. Consider their reputation, track record, and the specific products they offer. It's important to work with a reputable and regulated provider to ensure your financial security.

• Seek Professional Advice: This step is crucial. Consult with a Mortgage adviser (IFA) who specialises in equity release. They can help you understand your options, assess your financial situation, and provide personalised recommendations. Make sure the advisor is accredited and authorised by relevant regulatory bodies.

Final thoughts

To answer the question, Do You Pay Stamp Duty on Equity Release? No, you don't. However, this rule could always change if future tax laws change, potentially moving stamp duty from buyers to sellers. Specifically with a home reversion plan, where the transaction involves selling part or all of your property.