Is equity release money taxable?

Is equity release taxable? MoneyHelper describes the cash as tax-free, but capital gains, savings interest and benefit rules can still come into it.

Most people asking whether equity release is taxable want to know three things: whether the money counts as income, whether a capital gains tax bill follows, and whether it changes what they get from the state. On the first, MoneyHelper's answer is reassuring. The other two depend on the type of plan and on what you do with the cash afterwards. Your own tax position is for a tax adviser. A free phone talk with a qualified equity release adviser, requested through this page's form, can show how a plan would sit alongside your pension, savings and benefits.

The cash itself: what MoneyHelper says

MoneyHelper puts tax-free cash first in its list of the pros of equity release, whether the money comes as one sum or as regular income. It does not set out the reasoning. What it does explain is the two kinds of plan: with a lifetime mortgage you borrow against your property, and with a home reversion plan you sell some or all of it. A lifetime mortgage is usually cleared when you die or move into long-term care and the house is sold, though you can often choose to make repayments sooner. Money drawn in instalments through a drawdown lifetime mortgage, or taken as a regular amount (see equity release as retirement income), falls under MoneyHelper's "regular income" wording.

Two limits matter. First, MoneyHelper's line is a general description, not a ruling on anyone's tax return. Second, it covers the money coming in. Once it is in your account, what you do with it can have its own effects, and the sections below take them in turn: a part-sale of the home, interest on cash you keep, and the benefits rules.

Interest charged on the loan is a separate matter from tax. It is added to the debt and compounds, which how the interest works goes through, and the fees for advice and legal work come on top.

Capital gains tax: where selling part of the home comes in

GOV.UK defines capital gains tax as "a tax on the profit when you sell (or ‘dispose of’) something", and it is the gain, not the sum received, that is taxed. Borrowing against a house is not a sale, so a lifetime mortgage does not fit that description. Home reversion does: you part with a share of the property, or all of it, usually for less than its market value. The home reversion page and the comparison with a lifetime mortgage cover how that sale works.

The relief that usually matters is Private Residence Relief. The government's guide to selling a home lists five conditions for paying no capital gains tax when you sell your home: "you have one home and you’ve lived in it as your main home for all the time you’ve owned it"; you have not let part of it out (a lodger does not count); no part has been used only for business; the grounds are under the size limit; and you did not buy it just to make a gain. Meet them all and the relief is automatic; miss one and "you may have some tax to pay".

HMRC's helpsheet HS283 (the 2026 edition, for disposals in the 2025 to 2026 tax year) covers disposing of "part of a dwelling house which is your home" as well as the whole; how that fits a particular reversion sale is for a tax adviser to judge. Full relief needs all four of its conditions: the house was your only or main residence throughout your ownership; you were not absent except for an allowed period or job-related accommodation; the garden and grounds are within the permitted area; and no part was used exclusively for business. If you miss one, partial relief may still be available. The helpsheet calls itself "only an introduction" and suggests a tax adviser if you are in doubt, adding that HMRC can help too. Where tax is due on most sales of UK property, it has to be reported and paid within 60 days.

Each joint owner pays on their own share of any gain, and joint ownership and equity release looks at how a plan works for a couple.

Tax on the interest your cash earns

If you do not spend the money straight away and leave it in a bank or building society account, the interest it earns is a separate tax question from the loan. GOV.UK treats interest from bank, building society, savings and credit union accounts as potentially taxable, while interest inside an ISA and some National Savings and Investments products is not usually taxed. The Personal Savings Allowance, which runs for each tax year from 6 April to 5 April, depends on your Income Tax band: £1,000 for a basic rate taxpayer, £500 at the higher rate and £0 at the additional rate. On interest over the allowance "you usually pay Income Tax on the amount above the allowance". Your Personal Allowance and the starting rate for savings can also shelter interest if your other income is low; the full rules are in GOV.UK, Tax on savings interest.

The money arrives once the legal work is done (how long equity release takes has the stages), and on a lifetime mortgage the interest on the debt runs from then, spent or not.

Tax-free is not the same as benefit-free

Money that escapes tax can still be counted by the benefits system, and the rules are separate. Among the cons MoneyHelper gives is the impact on benefits: means-tested state benefits, council grants and Council Tax reductions "could be affected". The full picture belongs to equity release and benefits; the rules below are from GOV.UK and the legislation behind Pension Credit.

• Pension Credit (England, Scotland and Wales). Owning your home does not by itself stop you getting it. Savings and investments of up to £10,000 are ignored; above that, the excess is treated as weekly income at £1 for each £500, with a part-£500 also counted as £1 (regulation 15 of the State Pension Credit Regulations 2002). Released cash left in an account can count towards those savings. The same regulation separately prescribes "any payment made at regular intervals under an equity release scheme" as income for Pension Credit.
• Universal Credit. Claimants must normally be under State Pension age, though a couple can still claim if only one of them has reached it. Holdings over £6,000 cut the award "by £4.35 for every £250 you have between £6,000 and £16,000", and above £16,000 you cannot claim.
• Council Tax Reduction. Each council runs its own scheme, and what you get depends partly on household income, which here includes savings, pensions and a partner's income. Your council sets and explains the rules.

These thresholds can be tested against your own savings before you decide how much to take and how to hold it. An adviser who specialises in equity release can set a plan beside your benefits in one conversation, and booking that conversation means sending the form on this page, a quick and free step. The Pension Service helpline deals with Pension Credit changes, and your council can confirm its own scheme.

Inheritance tax, the other trade-offs and who to ask

Inheritance tax is a different tax on a different thing: it falls on an estate, not on money released while you are alive. Can equity release reduce inheritance tax? owns that question, and how equity release affects inheritance covers what your family would receive.

Whatever the tax answer, the usual trade-offs apply, all set out in our equity release guide: interest rolls up and compounds on a roll-up plan, the estate left is smaller, and early repayment charges can apply (the FCA's rule MCOB 3A.2.6R makes firms use that name in what they tell you). In Scotland the loan must be embodied in a standard security over the home (Conveyancing and Feudal Reform (Scotland) Act 1970, s 9). Equity Release Council members follow standards that include independent legal advice for every customer taking out equity release, and the solicitor page explains why. That is separate from the advice of a tax adviser, whom you would approach about your own tax; HMRC can also help, as its helpsheet says. If you are weighing other routes first, see alternatives to equity release.

Questions people ask

Do I pay income tax on the money from a lifetime mortgage?

MoneyHelper describes equity release money, whether a lump sum or regular income, as tax-free. Interest the cash earns once it is in a taxable savings account is a different matter: above your Personal Savings Allowance it is usually taxed.

Is equity release interest tax deductible?

Whether loan interest can ever be set against tax turns on your circumstances, for example whether a rental property is involved, so it is a question for a tax adviser. If you are thinking of a rental property, see equity release on a buy to let.

Do I pay capital gains tax on a lifetime mortgage?

Capital gains tax is charged on the gain when you sell or dispose of an asset, and a lifetime mortgage is a loan rather than a sale. Home reversion is the type that involves selling, and there Private Residence Relief may apply if its conditions are met.

Can I give the money to my children without tax?

Gifts are an inheritance tax question, and giving an asset away counts as a disposal for capital gains tax. Both are for a tax adviser; the inheritance side is on the inheritance tax page.

Where can I get tax advice about equity release?

A tax adviser or accountant can look at your own position, and HMRC can answer general questions. A qualified equity release adviser can explain the plan itself, and requests made via the form on this page are answered by phone.

Next step

Whether any of this touches you depends on the type of plan, how the money is paid and what you hold in savings. Your home, savings and plan type together decide it, and a qualified equity release adviser can weigh them with you in one call. If you would rather talk it over, the form on this page, sent in a minute or two, costs nothing.

Sources (read 20 October 2026): MoneyHelper, What is equity release? (archived 19 September 2026); GOV.UK, Capital Gains Tax and Tax when you sell your home; HMRC, HS283 Private Residence Relief; GOV.UK, Tax on savings interest; GOV.UK, Pension Credit eligibility; State Pension Credit Regulations 2002, regulation 15; GOV.UK, Universal Credit; GOV.UK, Council Tax Reduction; Equity Release Council, Professional Standards & Guarantees; Conveyancing and Feudal Reform (Scotland) Act 1970, s 9; FCA Handbook, MCOB 3A.2.6R.