Frequently Asked Questions

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How is "drawdown" treated?

"Drawdown" products allow clients to withdraw amounts of capital over a period of, typically 5 years; there is a limit to how much they can draw based on their age and the equity available in the property; at each point, the amount outstanding on their equity release mortgage is correspondingly increased.

If drawdown is taken regularly, such as at fixed monthly intervals, it will be treated as income for benefit purposes; if taken irregularly it will be regarded as lump sums of capital. Although HMRC may regard any funds made available through drawdown as a progressive release of the client's own capital, and therefore not subject to income tax, there can be, and are in this case, differences between the approaches taken between the tax and benefit authorities.

The DWP and local authorities administering CTR should not treat the client who has been offered this facility as actually having the capital, or having it available. They do not treat all owner-occupiers as having capital available simply because they too could seek such a mortgage on the equity in their houses, and the value of one's own property is ignored as a capital resource.