Do we need to pay any tax on releasing shares? - Z News

Will stock issue clients face a tax bill when they receive the money or sell the property? Mark Gregory explains the rules

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Question

My parents set up an equity release plan, a lifetime mortgage, a couple of years ago, and since then my father has sadly passed away. He has been in charge of all the finances and I am slowly trying to work my way through it all to help my mother have some control over things.

However, I am confused about the rules regarding issuing shares. She said they didn’t pay any tax on the money when they received it, but will they be responsible for the tax bill? Will there be any tax or fees to pay when the house is sold and the loan is repaid?

Mark’s answer

First, I’m sorry to hear about your father’s passing. It’s completely understandable that stock issuance paperwork can seem confusing – especially if your parent handles the finances. I will define the main “rules” in a clear way.

Importantly, the money released from a lifetime mortgage is not treated as income, so there it is There is no income tax to pay when the funds are releasedUnder normal circumstances, there is no tax bill simply because the plan ends.

How does a lifetime mortgage work (in simple terms)

A Lifetime mortgage It’s similar to a traditional mortgage where your parents borrow a tax-free lump sum secured against the house, with the servicer recording a legal fee at the Land Registry.

but:

Unlike a standard mortgage, there are no contractual monthly payments required.
Plan holders can choose to make full interest payments, partial payments, or no payments at all.
The plan typically continues until the last surviving plan holder dies or permanently moves into long-term care.
The loan is then repaid (principal + interest), usually from Proceeds from the sale of the property (Or from another funding source if the family wants to keep the home).

Will there be tax to pay when I sell the house and pay off the loan?

In most cases: No tax is paid simply to pay off the lifetime mortgage or to close the plan.

also:

There is usually No early repayment fees When the plan ends due to a second death or permanent long-term care.
Some providers charge a small final administration/recovery fee for final settlement like a regular mortgage.

“Window of Mercy” (useful to know)

Many lifetime mortgages also include what is often referred to as Merciful window. This means that the plan may be paid out upon first death (or upon entry into long-term care) within a specified period without penalty – typically up to three years depending on the terms of the provider and product.

Quick practical advice

Your mother can ask the provider for a current statement showing the balance due and the terms of the product. If you are helping her, you may need her permission (or power of attorney if possible) so the provider can talk to you.

If you like it, one of us Advisors with experience in issuing shares He or she can talk to you about your specific parenting plan and what to expect next — without any obligation 0800 802 1051.

Meet our expert…

Mark Gregory, Founder and CEO Supermarket stock issuehere to answer your questions. Mark is himself a consultant with over 20 years of equity issuance experience.