Preparing for change in 2025

It’s the start of another year in the equity release industry and your clients, facing retirement or the end of a mortgage term, may be starting to explore their financial options once again. To help you prepare for the new financial year, we’ve created a short guide to explain how key changes from the autumn budget may become a reality for your clients in 2025.

Inheritance tax

The current threshold of £325,000 that applies to inheritance tax of a deceased person’s assets will remain the same until 2030. Other rules that won’t change include:

• Exemptions for a person who leaves their estate to a husband, wife, or civil partner.
• Exemptions for a person who leaves their estate to certain charities or a community amateur sport club.
• An increased threshold of £500,000 for those leaving their estate to children or grandchildren.

However, some smaller changes are coming and may affect homeowners. For farmers leaving behind agricultural assets, tax will be now payable at anything over £1.325 million, but with half the normal 40% tax rate. This should only affect a smaller number of people but is more likely to affect clients with higher property values.

A change that is likely to catch more people out is that any money saved in a pension will now be included in a person’s assets. The likelihood of those required to pay inheritance tax is going to increase, with an estimated 10,000 estates liable in 2027/28.

Pensions

While pensions will soon be subject to inheritance tax, they are going to increase by 4.1%. The rise will work as follows:

• The new state pension will go to £230.25 a week- equivalent to £11,973 a year.
• The old basic state pension will go to £176.45 a week- equivalent to £9,175.40 a year.

The increase is to align with average earnings, but according to Retirement Standards Living, the agreed change isn’t enough. In fact, they state that a single person would need at least £14,400 for a minimum standard of living. That would mean the new pension would need to increase by roughly 20% more than the current proposal and may see homeowners seeking alternative lending options to fund their retirement.

Stamp duty

In 2025, stamp duty will change for main residences, second homes, and first-time buyers.

Main residences:

Second homes:

First-time buyers:

These changes could affect your clients if they want to use equity release to help their children or grandchildren buy their first home or purchase a holiday home, as stamp duty could increase the amount they were expecting to need.

Why do these changes matter?

While these changes may not affect everyone, some of your clients may be surprised and unprepared when planning their financial needs. By understanding the changes in advance, your clients can be one step ahead, preparing and adjusting their finances sooner rather than later.

If you have any questions about the incoming changes or you’d like to discuss a case with Royal London Equity Release, please get in contact with our Business Development Team today!