Westside Article – October 2020

No matter how large or how modest, everyone has an estate and you will want to control how it is administered to the people or organisations you care most about. There are lots of points to consider such as making a will, appointing a Lasting Power of Attorney or creating the right Trust to protect your assets and help your beneficiaries. It is important to plan ahead with confidence in order to minimise the tax burden for your family and loved ones in the future.

Many people will hold considerable investments and share portfolios that form part of their estate on death. It is possible to transfer some or all of those assets into alternative vehicles that fall outside of your estate after 2 years.  You can also retain access to the capital in case you need it. This is achieved by utilising business property relief which results in 100% relief from inheritance tax on the amount invested after a maximum of two years.

Business owners can gain business relief which makes their business exempt. However, when the business is sold, the sale proceeds are inside their estate for Inheritance Tax and 40% tax beckons. It is possible to re-invest into qualifying investments where the previous business reliefs are retained.

If your estate is valued at over £1M, as many increasingly are, then a Inheritance Tax Review is advisable.  Here’s an example of how it works:

A couple own a house worth £700K.  They also have –

ISA’s                                                £100K

Share portfolio                            £350K

Buy-To-Let houses                    £500K

Their total estate comes to £1.65M.  Assuming they have 2 Nil-rate bands of £325K each (£650K) plus a main residence nil-rate band of £175K each (£350K), it is possible for most people to pass on £1M of their estate tax free. In this example there is a £650K excess taxed at 40% so the tax bill would be £260K.

If the above clients transferred their existing share portfolio of £350K into an exempt asset, it would reduce their Inheritance Tax bill by £140K and they would still have control of their money, be able to access it at any time and receive a stable return.

More and more people are seeing the increase in house prices pushing their estate values higher and higher. The Government raise billions each year from people sleep walking into higher and higher taxes. It is time to act now.

Call us on 0114 235 3500 or email us at advice@hamnettwealth.com for a free consultation to find out how we can help you.  Our recommendations will take into account all of your investments, retirement and protection strategies so that your estate planning fits your goals.

You can read this month’s Westside online at https://www.rmcmedia.co.uk/magazines/westside/