Inheritance Tax is arguably voluntary since it is designed to be avoided by advance planning. There are only two forms of planning; gifting and tax exempt investing. All planning, no matter how complex it may seem, relies on one or other technique.
There are minor exemptions, the annual exemption (£3,000), small gifts (£250 each per recipient) and gifts around marriage. There is also a major exemption that is often overlooked for gifts out of income. These must be regular and come out of surplus income without depleting capital. Ideally records should be kept to prove intent and to prove that the gifts came from income.
Tax efficient investments
Part of the legislation concerns Business Property Relief (BPR). Originally intended to prevent the breakup of businesses on death, the relief has been extended over the years to shares in unquoted shares (including the AIM market). Provided the trade is not excluded it qualifies for BPR. For those willing to accept high risks (but potentially high returns) the AIM market may be suitable.
Most clients who seek our advice are more interested in preserving capital for their children and for these there is now a market in risk-managed investments. Typical trades include renewable energy, secured lending, housebuilding, commercial storage and the operation of school and clubs.
Download our guide ’10 Ways To Avoid IHT’ here (please note that this is out of date and is being rewritten, but it remains largely correct)
Whether you are seeking to protect yourself from the effects on your income of accident or ill health; or protecting loved ones from your death, protection planning is an integral part of any financial plan.
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