Understanding Inheritance Tax

In its simplest terms, Inheritance Tax (IHT) is charged on the money or assets that a person leaves behind when they pass away. It can also apply to certain gifts that are made before someone dies.

How much is Inheritance Tax?

There is normally no Inheritance Tax to pay if the value of your estate is below the £325,000 threshold or if you leave everything to your spouse or civil partner.

Currently, 40% Inheritance Tax is applicable on assets above the £325,000 tax-free threshold.

If you are married or in a civil partnership and your estate is worth less than £325,000, you can transfer any unused threshold to your partner when you die. This means their threshold can be as much as £650,000.

Inheritance Tax Planning

In recent years, the tax rate imposed by the UK Government has increased, leaving efficient tax planning more important than ever. Property values have remained at an all-time high leaving more and more people finding that the value of their estate is higher than the Inheritance Tax (IHT) threshold (currently £325,000).

Most Inheritance Tax planning involves the use of a £3,000 yearly gift allowance, regular gifts from income with no effect on living standards, small gift allowances of £250 and Potentially Exempt Transfers (PETs).

Our Inheritance Tax portfolio aims to purchase assets that qualify for Business Property Relief (BPR) (2-year rule) through investment in AIM-listed company shares.

How our IHT Portfolio Works

The Alternative Investment Market (AIM) is designed to allow smaller companies to float shares more easily and cost effectively than the main market.

Investing in AIM-listed securities carries a greater risk than those listed on the main market, which is why we apply a clear investment process, identifying high quality growth companies on valuations that we deem to be attractive.

We also engage with the companies and HMRC to determine their exact IHT status. Although we select investments with the view of holding them for a minimum of 2 years, the composition does not have to remain static.

To minimise the burden associated with monitoring and administering the investments, our IHT portfolio solution is offered under our Discretionary Fund Management service.

To find out more about this service, contact one of our advisors today.

Beaufort Securities Limited is not a professional taxation advisor and we recommend that clients seek independent financial advice in this respect. This information has been prepared in accordance with our understanding of current tax law and there are risks that tax legislation may be subject to change in the future. Tax treatment depends on individual circumstances.