The Intermediary – September 2025 - Flipbook - Page 73
L AT E R L I F E L E N D I N G
Opinion
Lifetime mortgages:
Secret weapon
against IHT
A
t first glance,
Inheritance Tax
(IHT) and lifetime
mortgages may
not appear to be
inextricably linked,
but in practice – and certainly
as legislation changes – they are
increasingly intertwined. For
advisers, they are now a ‘must have’ in
the client solution toolkit.
IHT is a big revenue generator for
HM Treasury, with the most recent
data from the Government showing it
brought in £3.1bn between April and
July this year. To put that into context,
not only is it a record high, but it
also represents an increase of £229m
compared with the same period
last year.
What’s more, IHT is only likely to
become a bigger concern for clients.
And it’s now not just a concern for the
obviously wealthy.
Last year’s Budget adapted the assets
which are considered when assessing
the value of an estate, bringing
undrawn defined contribution (DC)
pensions and death benefits into the
calculation. Coupled with freezing
the IHT thresholds, and the ongoing
rate of house price growth, this means
far more households are going to face
IHT bills.
Analysis from the Office for Budget
Responsibility (OBR), released
through a Freedom of Information
request, predicts that 150,000
households will face a bigger bill,
while 30,000 estates will be liable for
the tax, which otherwise would not
have been the case.
The tinkering with the rules
may not be finished either, with
speculation in the national press
recently of further changes to be
announced in the upcoming Budget,
potentially around gi allowances.
DAVE HARRIS
is CEO at more2life
Inheritance Tax is already an
incredibly unpopular levy, despite the
fact that comparatively few estates
actually pay it. The prospect of a larger
bill, or even an IHT bill at all, will
focus the minds of a growing number
of homeowners who may want to
find a way to mitigate the demands of
the taxman. That’s where a lifetime
mortgage can play a role.
Short and long-term
Lifetime mortgages have long been
utilised by homeowners in order
to make the most of their housing
wealth in the here and now. Unlocking
equity can allow them to carry
out home improvements to match
their changing needs, or perhaps to
supplement the pension they have
built up during their working life.
As house prices have grown, and
first-time buyers have faced a bigger
challenge in accessing the market,
some homeowners have opted to use
the sums raised through the lifetime
mortgage to pass on financial support
to loved ones, giving them a helping
hand onto the ladder.
This offers all of the potential
benefits that could come from
downsizing, but without the upheaval
or the pressure to find the right
property in the right location.
But it’s also becoming clear lifetime
mortgages can support those who are
also keen to mitigate their eventual
Inheritance Tax bill.
Unlocking housing wealth not
only opens up new opportunities in
the present, but can reduce the size
of the borrower’s estate so they face a
lower IHT bill, and in some cases no
bill at all.
Make partnerships count
For advisers, this is therefore a prime
moment to position themselves as
the go-to help with all elements of
property, including estate planning.
Of course, whenever tax is a priority
for clients, it’s important for advisers
to have tax specialists with whom they
can work. While advisers can signpost
the benefits lifetime mortgages can
offer, there needs to be a tax adviser
involved when it comes to the
actual calculations.
It’s a good example of how
partnering with the right firms can
ensure clients receive the best possible
experience. For some advisers,
lifetime mortgages themselves may
feel a lile out of the ordinary, and
again partnerships can provide
the answer. Aligning with a later
life specialist means you still have
a quality option for older clients,
without having to go through
the required assessments and
qualifications yourself.
Given the ageing population and
the aention of the regulator, advisers
need to be able to present older clients
with the full range of options open to
them, and partnering with a specialist
may be worth considering.
Aer all, irrespective of what
happens with IHT, older homeowners
will continue to want help in utilising
their housing wealth. Advisers do not
want to miss out on that opportunity.
The sooner these conversations
start, the more options clients will
have and the more value advisers
can deliver. ●
September 2025 | The Intermediary
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