IHT friendly ISAs

A common theme for our clients and other professionals that we speak to is what can we do to mitigate various forms of tax.

With this in mind, we decided we should write about some of the options available, over the next few weeks to give you some food for thought.

Inheritance Tax (IHT) is a particularly unpopular tax as people don’t like to think about a large portion of their legacy going to the Chancellor of the Exchequer, instead of their family.

First of these is a fairly new solution which came into being in August 2013, AIM ISAs.

We wrote about this in July but it is a subject which comes up on a regular basis, so we don’t think it will do any harm to run through it again.

You can now transfer your ISA holdings into an AIM portfolio, retaining the ISA benefits while attracting relief from IHT after 2 years.

This means that after 2 years, your fund would not be subject to IHT at 40%.

As with your current ISA you can access the funds at any time.

For those unfamiliar with AIM investment, these are investments in companies listed on the Alternative Investment Market.

Most traditional IHT planning solutions require a 7-year time period for full relief; However, investment in these companies attracts Business Property Relief (BPR), meaning that after 2 years the investment is no longer liable to IHT.

This does not apply to all companies listed on AIM of which there are around 1000.

Any AIM investment for the purposes of estate planning should be overseen by a specialist fund manager and regularly audited to make sure the companies continue to qualify for BPR.

You may think that this sounds a bit risky, after all these companies are not listed on the main markets for a reason, however some of this is mitigated by the IHT benefit.

While its true that there are a lot of small, technology driven companies listed on AIM for the purposes of raising funds, there are also some household names which for a variety of reasons decide not to move onto one of the main markets (FTSE Allshare, etc).

It is certainly worth considering looking at your ISA investments in a different light and thinking about how much of these investments you would like to shelter from IHT.

We would not recommend a solution like this to everyone nor is it for the majority of your assets but it may well be worth thinking about for a proportion depending on each individuals circumstances.

We will look at more tax planning options next week, but in the meantime feel free to contact us via any of our social media, email or even by telephone.

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