We are in the paper....Do you (or your family) need to avoid Inheritance Tax quickly?

Many people think that the only way to avoid Inheritance Tax (40%) is to gift money out of their estate or put the money into trust. But there is another way.

Investments that qualify for Business Property Relief (BPR) can be passed on free from Inheritance Tax upon the death of the investor, provided the shares have been owned for at least two years at that time.

Generally speaking, investments in the following kinds of businesses that carry on a trade rather than investment activities could qualify for BPR.  These include:

  • Shares in qualifying companies listed on the Alternative Investment Market (AIM)
  • An interest in a qualifying business, such as a partnership
  • Shares in qualifying companies that are not listed on any stock exchange

Investors can now hold AIM-listed shares within an ISA. This means an ISA that invests specifically in AIM-listed companies expected to qualify for BPR can offer inheritance tax exemption as well as the traditional ISA benefits of tax-free income and capital growth.

So, investing in the shares of BPR-qualifying companies can be very useful, if:  

  • You don’t want to give away large sums of money: If you feel uncomfortable gifting large sums of money from your estate you could invest in a BPR-qualifying investment - the shares are held in your name, which means you keep hold of your wealth
  • You want the money you invest to become inheritance tax exempt quickly: Traditional estate planning strategies, such as making gifts or putting money in trust, typically take seven years before becoming fully exempt from inheritance tax. With a BPR-qualifying investment, the shares become 100% inheritance tax exempt after a holding period of just two years, as long as the shares are still held at the time of death.

Of course, when looking to put money into an investment that qualifies for BPR you must consider the risks of doing so. It is a high-risk investment and tax legislation may change in future, so it is best to seek professional advice

To raise awareness of investing to avoid inheritance tax, True Financial Design Ltd offer a FREE INITIAL meeting to discuss your needs and how this could help your family and if you become a client you receive £100 of John Lewis Vouchers which you will receive once your recommendation is in place.

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