Simplified property wealth gifting rules sought as younger buyers rely on family support
The role of family contributions in the UK housing market is becoming increasingly significant, with growing calls for the government to simplify tax rules on property wealth gifting.
Key Later Life Finance and Legal & General – both major players in the later life lending sector – emphasise the importance of intergenerational support, particularly as younger buyers continue to rely heavily on financial assistance from older relatives.
Key Later Life Finance has urged chancellor Rachel Reeves to overhaul inheritance tax (IHT) rules on property wealth gifting in the upcoming October 30 budget. It argues that simplifying these rules, particularly the seven-year clawback provision, would encourage older homeowners to use their property wealth to help younger family members, thereby alleviating some of the pressure on first-time buyers.
Key warns that complex IHT rules are deterring over-50s, who own 78% of UK property wealth, from making such gifts. The call for reform comes as the Labour government aims to address the housing shortage with an ambitious plan to build 1.5 million homes over five years. Key believes that supporting the Bank of Family will be crucial to ensuring these homes are affordable for younger generations.
“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,” said Will Hale (pictured left), group director at Key Group.
“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.
“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.”
Meanwhile, new research from Legal & General and the Centre for Economics and Business Research (Cebr) shows that family contributions are expected to help fund 42% of property purchases by those under 55 in 2024, with gifting from parents and grandparents predicted to reach £11.3 billion by 2026.
The report found that 19% of families supporting younger buyers are using their property wealth through downsizing, equity release, or remortgaging. Despite the growing use of equity release, 74% of those making financial gifts did not seek professional advice, raising concerns about the long-term financial impact.
“Property wealth remains one of the most significant assets for families across the country, so it comes as no surprise that relatives are using it to provide financial support to younger members buying a home,” said Lorna Shah (pictured right), managing director of retail retirement at Legal & General.
“Although products like lifetime mortgages are always supported by specialist financial advice, it’s important that anyone making a significant gift seeks help from a financial adviser, even if their property isn’t the source of their funds. As equity release moves more into the mainstream, more people are likely to turn to it for help. The Bank of Family is predicted to have a busier year than ever, so we might see more people drawing equity from their property to support their loved ones.”
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