Investing for Tomorrow have a longstanding relationship with HRLFC and are so pleased to be saying ‘Bienvenue’ to Kevin. We hope that this hails the continuation of great things for the club in the coming year.
Read more about the signing on the Halifax RLFC website.
Our managing partner, Laurence Turner, has been in financial services since May 1986 and has been authorised to give advice on and transact occupational pension transfers for decades. This in no way means he’s out of touch, quite the contrary.
Along with the rest of the Investing for Tomorrow team, Laurence is fully qualified and constantly gaining new skills and certificates. He elected to take the latest exam to prove he is still up to date and current on pension transfer matters and he passed.
We’re also delighted to have recently received confirmation from the Chartered Insurance Institute that our Chartered Financial Planners status has been renewed for another year.
“Chartered titles are jealously guarded by professional bodies and are not awarded lightly. Chartered status therefore brings with it a number of serious obligations.
The title Chartered Financial Planners is a public declaration that the advice given by a firm:
The practice continues to grow by referral to others.
We would therefore appreciate being introduced to friends, family members and colleagues who you feel might benefit from our services.
Wishing you all a very happy holiday season and very much looking forward to hearing from you in the coming months. Remember not to leave it all to the end of March! It’s never to early to get prepared for the new tax year.
Corrections can be healthy and result in even stronger growth in the future, although this isn’t guaranteed and you could get back less than you invest. This is why holding a diversified portfolio for the long term makes good investing sense. It’s time invested in the market, and not the timing of the market, which dictates long-term returns.
Missing out on opportunities
The relentless and continual rise in value over the very long term is typically punctuated by falls. It’s important not to let global uncertainties affect your investment strategy for the years ahead. Individuals who stop investing, particularly during market downturns, can often miss out on opportunities to invest at lower prices.
Such volatility is less frightening if you take a longer-term view. It’s important to stick to your strategy and keep moving ahead consistently by spreading risk and growing your wealth. It’s volatility in stock markets that make investors nervous. But on the flipside, not all volatility is bad: without volatility, stock prices would never rise.
Avoid being blown off course
In practice, everyone’s investment goals are different. By deciding on your long-term financial priorities – whether it’s funding your children’s education or saving enough to be able to retire early – you can avoid being blown off course by short-term events.
Trying to second-guess the impact of events such as a global trade war, Brexit or a stock market correction, and tariff concerns or fears that earnings will continue to disappoint – or even attempting to make a bet on them – rarely pays off. Instead, investors who focus on long-term horizons (at least five to ten years) have historically fared much better.
Considered and strategic approach
Sensible diversification – owning a mix of assets, including shares, bonds and alternative investment such as property – can help protect investors over the long term. When one area of a portfolio underperforms, another part should provide important protection – and it’s never too early
or too late to start taking this considered and strategic approach.
Volatility, risk and market declines are a normal part of the investing cycle, but the media likes drama. Reports will use words that make these market fluctuations sound alarming, so be cautious about reacting to the unnerving 24/7 news cycle.
Reflecting risk tolerances and timelines
If you have a well-diversified portfolio, then it’s more important than ever to stay the course. You have a strategy in place that reflects your risk tolerance and timeline, so stay committed. However, if you reacted and sold in a previous market decline or have not implemented a strategic asset allocation, then now is the time to have a discussion about your investment options.
Be aware of the psychological affect this type of volatility has on you as an investor, and resist the urge to be reactive. The recent decline was expected and is coming after financial markets as a whole have experienced a historic bull phase for close to ten years now. No one knows how severe any market turbulence will be or what the market will do next. It could be over quickly or linger for a while. But no matter what lies ahead, proper diversification and perseverance over the long term are what’s mo
As well as facing time pressures, chances are your finances will be stretched too. New research[1] warns that the UK’s Sandwich Generation is feeling strained when it comes to their financial responsibilities. It has found this group of around 2.4 million[2] people – typically between 40 and 60 years old – lacks financial confidence and preparedness. And as this age group grows older, the issue is set to intensify.
Consequences of a serious illness
More than half (52%)[2] are worried about the consequences of a serious illness affecting themselves or their partner in the next 12 months (versus 35% national average). They are also nearly two times more likely to worry about the prospect of themselves or their partner dying and leaving the family without an income (30% compared to 17% national average)[3].
The research also reveals the Sandwich Generation are unprepared for the longer-term future. Nearly two in five (37%) have less than £125 disposable income each month[3], with nearly half (46%)[3] citing their children as a constant source of unexpected expenses. More than half (54%)[3] say they want to save but can’t afford to do so – which also means they struggle to top up their pension pots. On average, this group has around £60,000 to retire on, while expecting their funds to last around 20 years, which would provide a monthly income of less than £260[3].
Being pulled in many directions
While your own financial security is important, many of the Sandwich Generation find that their parents’ finances also become a pressing issue, especially if they become unwell. It is clear that this group feel they are being pulled in many directions, with pressures to care for older relatives and ongoing responsibilities for their children.
Many people who fall into the Sandwich Generation may have significant financial obligations and, with the rising cost of living, are worrying more about what could be around the corner. Spreading finances too thinly and dwelling on their worries mean the impact of having little or no plans in place could expose them to a real income shock. The Money Advice Service recommends you should have an emergency savings fund buffer for essential outgoings of between three to six months to help maintain financial resilience.
Understanding the options available
Getting a better understanding of the options available is essential to being prepared for a more secure financial future. This can provide peace of mind against income shocks, such as not being able to work due to illness, and can help them ensure they are putting away what they need for their retirement.
Nearly three in five (57%)[3] of people within the Sandwich Generation fall short of the Money Advice Service (MAS) recommended amount of savings to be financially resilient, and more than a third (34%)[3] don’t feel they could handle a personal financial crisis.τ
Source data:
[1] Methodology for consumer survey: YouGov, on behalf of LV=, conducted online interviews with 8,529 UK adults between 20–26 June 2018. Data has been weighted to reflect a nationally representative audience.
[2] Estimate from CarersUK.
[3] Based on averages from YouGov from consumer survey. This is the average of ‘Total amount in pensions’ divided by ‘Time retirement funds will last’. So, £60,933 divided by 19.82 years.
Dot-com bubble
The bursting of the dot-com bubble in March 2000 caused the FTSE 100 to enter a period of significant decline, reaching its lowest levels around October 2002. A £1,000 investment in the average investment company at the beginning of March 2000, just before the downturn, would have recovered and grown to a staggering £4,350 at the end of August 2018 – a gain of 335%. While 18-and-a-half years is a long time, it includes a recovery from both the dot-com crash and the global financial crisis and is an example of the benefits of long-term investing, particularly when the original £1,000 investment would have initially fallen to £660 in October 2002 before recovering.
Global financial crisis
The global financial crisis of 2007 to 2009 was a period of market turmoil and a major economic downturn. A £1,000 investment in the average investment company at the beginning of October 2007, when markets were near their highest levels before the crash began, would now be worth £2,470 (end August 2018) – a 147% increase almost 11 years later. This is particularly impressive given that the investment fell to £580 around the time of the market low in February 2009, and it demonstrates again the benefits of investing with a long-term view.
Investing over the long term
The data suggests that even when investing near-market highs, lump sum investments beat regular investments over the long term. For example, a £50 monthly investment in the average investment company from October 2007 to August 2018 (£6,550 invested) would now be worth £13,736 (end August 2018) – a gain of 110%. However, a lump sum investment of £6,550 over the same time frame would now be worth £16,178 – a gain of 147%. Over longer time frames, the difference is even greater. Investing £50 a month in the average investment company from March 2000 to August 2018 (£11,100 invested) is now worth £37,240 – an increase of 235%. Whereas £11,100 invested as a lump sum over the same period is now worth £48,281 – an increase of 335%.
Time in the market, not timing the market
It can be tempting to try to time stock market investments, but the saying ‘time in the market, not timing the market’ really has held true. Investors who invested in investment companies at the top of the market before the financial crisis and were able to hold on through the downturn would still have generated very strong returns over the long term.
Smooth the volatility of markets
Investing in lump sums has outperformed regular investing over these longer time frames as more money has been invested in an ultimately rising market. However, regular investments are a convenient way to invest for people who do not have a lump sum, and they allow anxious investors to sleep more soundly at night because they smooth the volatility of markets.
Source data:
[1] The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment. Today, the AIC represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help members add value for shareholders over the longer term. The AIC has 354 members, and the industry has total assets of approximately £188 billion.
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.
THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.
PAST PERFORMANCE IS NOT A RELIABLE INDICATOR
OF FUTURE PERFORMANCE.
With today’s kids likely to need thousands of pounds to get them through university and onto the property ladder, a Christmas gift that will help with some of these expenses is well worth considering.
If the investment is allowed to grow, it could build up into a sizeable sum. The money could then be given to the child as an adult. Depending on the amount invested, the capital may be enough to cover tuition fees and possibly board and lodging as well, or a deposit for their first property.
Junior Individual Savings Account (JISAs)
A JISA is a tax-efficient children’s savings account where you can make contributions on the child’s behalf, subject to an annual limit. Any gains do not incur Capital Gains Tax and they will not be considered part of the parents’ or grandparents’ estate for Inheritance Tax purposes.
Nevertheless, the child will automatically get access to the money when they turn 18 and can choose what to do with it.
There are two types of JISA – a Cash JISA and a Stocks & Shares JISA:
Junior Cash ISAs – these are essentially the same as a bank or building society savings account. But Junior Cash ISAs come with one big advantage: your child doesn’t have to pay tax on the interest they earn on their savings, and you don’t have to either
Junior Stocks & Shares ISAs – with a Junior Stocks & Shares ISA account, you can put your child’s savings into investments like shares and bonds. Any profits you earn by trading shares or bonds are tax-efficient
A child’s parent or legal guardian must open the Junior ISA account on their behalf. Money in the account belongs to the child, but they can’t withdraw it until they turn 18, apart from in exceptional circumstances. They can, however, start managing their account on their own from age 16.
The Junior ISA limit is £4,260 for the tax year 2018/19. If more than this is put into a Junior ISA, the excess is held in a savings account in trust for the child – it cannot be returned to the donor. Parents, friends and family can all save on behalf of the child as long as the total stays under the annual limit. No tax is payable on interest or investment gains.
When the child turns 18, their account is automatically rolled over into an adult ISA. They can also choose to take the money out and spend it how they like.
Pensions
A pension is one of the greatest gifts you could give children this Christmas. Children’s pensions benefit from the same advantages as adult pensions. That means the pension fund benefits from the favorable tax treatment, in terms of tax relief on contributions along with the tax advantages of the fund.
Investment account
For tax reasons, this approach may best be suited to grandparents. A grandparent can set up a designated account for a grandchild and invest a capital sum in it. The account remains under the full control and ownership of the grandparent, with any income and gains taxed as the grandparent’s own.
When the grandparent deems appropriate, the account can be gifted or assigned to the child. Where this occurs, the grandchild is legally entitled to the money at age 18, and can use it as they see fit – which may not necessarily be for education purposes. The transfer of ownership of the monies would be treated as a Potentially Exempt Transfer (PET). The value of the gift will be outside the grandparent’s estate after seven years. Many parents and grandparents want to set up their children or grandchildren to enjoy a secure financial future. Yet paying down student debt is not necessarily the best option if they have a spare capital sum to invest. They could also consider helping their children or grandchildren to save towards a deposit for a property or start a pension for them so that they have security in later life.
THE VALUE OF INVESTMENTS AND THE INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.
A PENSION IS A LONG-TERM INVESTMENT, WHICH IS NOT NORMALLY ACCESSIBLE UNTIL AGE 55.
LEVELS, BASES OF AND RELIEFS FROM TAXATION MAY BE SUBJECT TO CHANGE, AND THEIR VALUE DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF THE INVESTOR.
Annual and lifetime limits
Getting tax relief on pensions means some of your money that would have gone to the Government as tax goes into your pension instead. You can put as much as you want into your pension, but there are annual and lifetime limits on how much tax relief you receive on your pension contributions. Please note that if you are a Scottish taxpayer, the tax relief you will be entitled to will be at the Scottish Rate of Income Tax, which may differ from the rest of the UK.
Provided that you stay within your pension allowances, all pensions give you tax relief at the rate that you have paid on your contributions. For personal pensions, you receive tax relief at the basic rate of 20% inside the pension. That means for every £800 you pay in, HM Revenue & Customs (HMRC) will top it up to £1,000. If you’re a higher or additional rate taxpayer, you can claim back up to an additional 20% or 25% on top of the 20% basic rate tax relief through your self-assessment tax return.
Benefit from tax relief
For workplace pensions, your employer normally takes your pension contribution directly from your salary before Income Tax so that the contribution is not taxed at source like the rest of your employment income, and therefore the full benefit is received inside your pension immediately. If your employer does not handle your contributions before tax, then these would benefit from tax relief in the same way as for a personal pension contribution.
You’re still entitled to receive basic rate tax relief on pension contributions even if you don’t pay tax. The maximum you can pay into your pension as a non-taxpayer is £2,880 a year, which is equivalent to a £3,600 contribution once you factor in tax relief.
Total amount of contributions
The annual allowance is a limit to the total amount of contributions that can be paid in to defined contribution pension schemes and the total amount of benefits that you can build up in a defined benefit pension scheme each year for tax relief purposes.
Taxpayers can pay in up to 100% of their income, up to an annual allowance of £40,000. Any contributions you make over this limit won’t attract tax relief and will be added to your other income, being subject to Income Tax at the rate(s) that applies to you.
Your annual allowance will reduce from £40,000 if your income plus your pension contributions totals £150,000 or more. For every £2 in excess of £150,000, your allowance will reduce by £1, until it reaches a minimum allowance of £10,000.
Carry forward unused allowances
You can also carry forward unused allowances from the previous three years, as long as you were a member of a registered pension scheme during this period.
If you choose to take a taxable income from a personal pension other than via an annuity, your annual allowance will be reduced to £4,000 or 100% of earnings, whichever is lower, and you won’t be able to carry forward previous unused allowances.
Paying tax on the excess
As well as the annual allowance, there’s also a maximum total amount you can hold within all your pension funds without having to pay extra tax when you withdraw money from them, known as the ‘lifetime allowance’. The standard lifetime allowance is £1,030,000 (2018/19), but some people have a higher allowance. The standard lifetime allowance is inflation linked, so it’s likely to increase each year.
If the value of your pension savings is higher than this, and you have not secured protection from HMRC against the changes in the lifetime allowance at the point that they reduced, you will pay tax on the excess. So, if you’re approaching this limit, be careful about contributing too much.
There’s no immediate tax charge once your pension fund grows beyond your lifetime allowance. It’s only when you choose to take your pension benefits over your lifetime allowance that you pay a tax charge, and the charge only applies to the benefits taken over your allowance.
Freedoms give greater flexibility
Commencing 6 April 2015, under the new ‘pension freedoms’ rules, you can now access your savings from your defined contributions pension scheme once you reach age 55. You cannot make withdrawals from a pension before you’re 55, moving to 56 in 2019 and 57 by 2028. If you’re due to reach retirement this year, you could take up to 25% of your pension fund as a tax-free lump sum if you want to, but the remaining 75% will be liable to Income Tax.
Previously, most pensioners purchased an annuity with their pot, which paid a guaranteed income for life. The pension freedoms give greater flexibility over retirement funding. But you’ll need to plan any withdrawals you make carefully, as taking large sums from your pension can boost your income in a particular tax year, pushing you into a higher rate of tax so that you pay more tax than you need to.
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.
THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.
When choosing between these options, think about:
Affordability – a joint life policy is usually more affordable than two separate single policies
Cover needs – do you both have the same life insurance needs, or would separate policies with different levels of cover be more appropriate?
Work benefits – if one of you has work ‘death in service’ benefit, you might only need one plan
Health – if your joint policy is with someone in poor health, this may increase your monthly payments
VCTs have historically been used as an end-of-tax-year financial planning tool, but this is no longer the case. They may appeal to investors who are already maximising their annual Individual Savings Account and pension allowances and have further cash to invest. Alternatively, they may be appropriate for investors who have reached the pension lifetime allowance and want to supplement their retirement income strategy by investing in VCTs for tax-free dividends.
Portfolio diversification
VCTs may also appeal to higher earners with a total income over £150,000 who are affected by the tapered pension annual allowance and who want to reduce their Income Tax bill, or even investors who want to add some exposure in their portfolios to small, young UK enterprises with growth potential, or diversify their portfolio with exposure to unquoted companies.
A VCT is a company whose shares trade on the London stock market. They are high-risk investments that in certain scenarios could work well for individuals, depending on their personal circumstances, but there are very strict rules on how VCTs can invest your pooled money in order to qualify as VCTs.
Investments in VCTs carry tax relief to encourage you to invest in these smaller, higher-risk companies. By pooling your investments with those of other customers, they allow you to spread the risk over a number of small companies.
VCTs must:
Invest at least 70% in qualifying companies within three years
Invest at least 70% in ordinary shares within three years
Derive their income wholly or mainly from shares or securities
Have no holding in one company representing more than 15% of the portfolio’s overall holding
Quote their ordinary shares on the London Stock Exchange
Retain no more than 15% of their income
Qualifying holdings must:
Have gross assets of no more than £15 million before investment
Receive no more than £5 million of VCT investment in any 12-month period
Undertake a qualifying trade which generally excludes property, hotels, nursing homes, dealing in land or commodities, financial or legal services, leasing, etc.
Have no more than 250 full-time employees at the time of investment
Subscribing to new shares
Investors can gain access by subscribing to new shares when a trust is launched or by buying shares from other investors when the trust has been established. Investors receive Income Tax relief when they buy newly issued VCTs, currently at the rate of 30% on investments of up to £200,000 per tax year.
This relief is provided as a tax credit to set against the investors’ total Income Tax liability and, therefore, cannot exceed their total tax liability for the tax year. VCT tax reliefs apply to people aged 18 years or over who are UK income taxpayers, and are only available if the trust maintains VCT status. The relief received depends on the investors’ own individual circumstances.
Investors do not receive this tax relief if they buy existing VCT shares. They have to hold shares in a VCT for at least five years to keep the Income Tax relief – if they have to sell them before then, they’ll lose this benefit. There is also no Capital Gains Tax payable on profits from selling VCT shares, no matter how short a period they are held, provided the company maintains its VCT status.
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.
THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.
PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.
Seeking early professional financial advice and guidance about the options to mitigate your liability is a sensible move, and there are lots of different options to be considered depending on your individual financial and personal circumstances and preferences.
Future needs and asset review
By looking at your future needs and reviewing all your assets, including investments, property, businesses, pensions and life assurance – and by gifting and utilising investment reliefs – we can advise you how to plan the most effective way to pass on your wealth. Inheritance Tax is an unpopular and controversial tax, coming as it does at a time of loss and mourning.
But as property prices make Inheritance Tax more of a reality for many in the UK, it can impact on families with even quite modest assets – including those who have been basic-rate taxpayers all their lives. It’s important to note that Scottish law is different and applies to the estates of people who die domiciled in Scotland, which differs from the rest of the UK.
Failing to put your financial affairs in order
It can be difficult to accept that you have to pay tax on your estate – which has usually been accumulated out of taxed income – and that your heirs will not reap the full rewards of your hard work. However, many people who end up paying Inheritance Tax do so because they have failed to put their financial affairs in order in advance. If you plan proficiently, neither you nor your heirs may have to pay Inheritance Tax at all.
How much the tax bill might be
The first step in Inheritance Tax planning is to work out how much the tax bill might be. This isn’t easy, bearing in mind the ever-changing values of property and other assets, plus changing legislation. Inheritance Tax is levied at a fixed rate of 40% on all assets worth more than the £325,000 nil-rate band threshold per person.
Your tax rate may be reduced to 36% if you leave 10% or more of your estate to charity. Your estate (including any gifts made by you) can pass Inheritance Tax–free to a spouse or registered civil partner living in the UK. This can give you a joint allowance of £650,000.
Family home allowance
From 6 April 2017, a family home allowance (known as the ‘residence nil-rate band’) was added to the Inheritance Tax threshold. This is currently £125,000, increasing to £175,000 by 2020/21, and applies where a home is left to direct descendants (such as children or grandchildren) of the deceased. Like the nil-rate band, any unused portion is transferable between spouses and registered civil partners.
There are effective and legitimate ways to mitigate against the impact of Inheritance Tax. But some of the most valuable exemptions must be used seven years before your death to be fully effective, so it makes sense to consider ways to plan for Inheritance Tax sooner rather than later.
Mitigating against Inheritance Tax
Make a Will
One of the most important things you can do to help reduce the amount of Inheritance Tax you could be liable to pay is to write a Will. If you die without a Will, your estate is divided out according to a pre-set formula, and you have no say over who gets what and how much tax is payable. Dying intestate (without a Will) means that you may not be making the most of the Inheritance Tax exemption which exists if you wish your estate to pass to your spouse or registered civil partner.
If you don’t make a Will, then relatives other than your spouse or registered civil partner may be entitled to a share of your estate, and this might trigger an Inheritance Tax liability. You also need to keep your Will up-to-date. Getting married, divorced or having children are all key times to review your Will. If the changes are minor, you could add what’s called a ‘codicil’ to the original Will.
Make lifetime gifts
Gifts made to an individual or to a bare trust more than seven years before you die are free of Inheritance Tax, so it might be wise to pass on some of your wealth while you are still alive. This will reduce the value of your estate when it is assessed for Inheritance Tax purposes, and there is no limit on the sums you can pass on. You can gift as much as you wish, and this is known as a ‘potentially exempt transfer’ (PET).
If you live for seven years after making such a gift, then it will be exempt from Inheritance Tax. But should you be unfortunate enough to die within seven years, then it will still be counted as part of your estate if it is above the annual gift allowance. You need to be particularly careful if you are giving away your home to your children with conditions attached to it, or if you give it away but continue to benefit from it. This is known as a ‘gift with reservation of benefit’.
You can make certain gifts that are given favourable
Inheritance Tax treatment:
Charitable gifts made to a qualifying charity during your lifetime or in your Will
Potentially exempt transfers (PETs). If you survive for seven years after making a gift to someone, that gift is generally exempt from Inheritance Tax
You can give away up to £3,000 each year, and you can use your unused allowance from the previous year
You can make small gifts up to £250 to as many people as you like Inheritance Tax–free
Weddings and registered civil partnership gifts are exempt up to a certain amount
You can make regular gifts from surplus income after tax, but these need to be documented and lead to no reduction in standard of living for you as donor
Set up a trust
Some people who make gifts to reduce Inheritance Tax are concerned about losing control of the money. This is where trusts can help. When you set up a trust, it is a legal arrangement, and you will need to appoint ‘trustees’ who are responsible for holding and managing the assets. Trustees have a responsibility to manage the trust on behalf of, and in the best interest of, the beneficiaries in accordance with the trust terms. The terms will be set out in a legal document called the ‘trust deed’.
You need to bear in mind that there might be tax consequences if you set up a trust. The rules around trusts are complicated, so you should always obtain professional advice.
Insurance policy
If you don’t want to give away your assets while you’re still alive, another option is to take out life cover, which can pay out an amount equal to your estimated Inheritance Tax liability on death. It’s essential that the policy is written in an appropriate trust, so that it pays out outside your estate.
One option could be to purchase a whole-of-life assurance policy, designed to provide funds to the beneficiaries of your estate in the event of your death, to meet the cost of any Inheritance Tax bill payable.
Business property relief
Business property relief can be a very effective way to remove assets from your estate but still have full access to the funds if needed in the future. You can hold shares in the portfolios of certain companies; they are considered business assets and attract 100% relief from Inheritance Tax. You’ll only need to hold these shares for two years to qualify for business property relief. Qualifying companies include most of those trading on the London Stock Exchange’s Alternative Investment Market.
Investments eligible for Business Property Relief are generally considered higher-risk investments and may not be considered suitable for all types of investors. You could lose some or all of your capital.
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM TAXATION, ARE SUBJECT TO CHANGE.
