Ahead of the Spring Budget, the later life advice firm said the Chancellor should acknowledge the role of equity release in supporting first-time buyers and redistributing property wealth by removing the seven-year IHT claw back rule on property related gifting.
It said equity release could play a big part in easing first-time buyer challenges, but some homeowners were put off from gifting money because of the tax claw back.
Currently, people can gift £3,000 a year without affecting IHT but larger amounts must be given seven years before death to avoid the clawback.
Key said removing this would encourage more homeowners to gift their property wealth.
Last year, some £430m was gifted to relatives but Key said this could be higher in a better tax environment. At the same time, the number of first-time buyers fell by 21 per cent annually to an estimated 290,000 in 2023, which would make it the lowest for a decade.
IHT tax receipts increased by £400m to £5.7bn from April to December last year and this is expected to rise to £8.4bn by the 2027/28 tax year.
Will Hale, group director at Key Group, said: “Equity release has an important role to play in making the UK’s housing market work better for first-time buyers and their parents and grandparents. There is a significant opportunity to grow the transfer of property wealth from older generations to younger to support the wider housing market.
“The government has set out plans to turbocharge housebuilding which are very welcome, but the market will also benefit from releasing the wealth tied up in existing properties and that process needs to be made much easier.
“Recognition for the role of equity release in supporting first-time buyers and some much needed changes to IHT gifting rules to make it easier to give money, would be a major boost for everyone in the market now, as well as helping future generations.”
