Share Prices & Company Research


28 November 2016

Number of UK estates paying inheritance tax hits 40-year high

The number of UK families paying inheritance tax (IHT) is now at a 40-year high thanks to rising house prices which have helped push the value of family assets above the IHT threshold.

“As wealth, especially across the middle and upper classes, rises, the Treasury continues to get a boost from an increase in IHT. The latest figures indicate that HMRC is set to take an even greater amount of people’s estates over the next few years as house prices and share prices have boosted the value of family assets,” explains James Andrews, Head of Investment Management at Redmayne-Bentley.

If your estate is worth £325,000 or more then you are at risk of having 40 per cent of the remainder lost to an IHT liability.

He added: “There are some well-established ways in which IHT can be mitigated and wealth preserved, including the gifting of assets, setting up trusts and making the most of investments that qualify for Business Property Relief (BPR).”

BPR was introduced to ensure that after the death of the owner, a family-owned business could survive as a trading entity, without having to be sold or broken up to pay an IHT liability. Amendments by subsequent governments have made BPR significantly more attractive to private investors who are concerned about potential IHT liabilities.

However, one of the difficulties is retaining control and access, as a lot of these methods require relinquishing control of your assets. That is where investing in a portfolio of BPR qualifying Alternative Investment Market (AIM) stocks comes in, such as those found in Redmayne- Bentley’s Inheritance Tax Portfolio service. In addition to this you have the time factor. Traditional estate planning solutions can take 7 years before they become exempt from IHT. However, an investment in our Inheritance Tax Portfolio service can become 100 per cent IHT exempt after investments are held for just 2 years. This could save beneficiaries 40 per cent of the value of the portfolio at the time of death, without any complex and costly legal arrangements. In 2013, a decision was made to allow AIM-traded shares to be held within an ISA, meaning that investors can now hold BPR-qualifying shares within this tax-efficient wrapper.

Redmayne-Bentley’s Inheritance Tax Portfolio service provides a facility to mitigate IHT by investing in a portfolio of qualifying shares traded on AIM, and the portfolio is managed on a discretionary basis so that clients can rest assured knowing a highly-qualified investment manager is managing their portfolio for them.

The overriding objective of Redmayne-Bentley’s Inheritance Tax Portfolio service is capital preservation and delivering a consistent, but modest, level of return over the long term. The portfolio will be managed within a high-risk mandate associated with AIM shares due to their potential lack of liquidity and increased volatility.

Mr Andrews concluded: “Our clients are extremely important to us, and have worked hard to create a lasting legacy for their families. Our objective with the Inheritance Tax Portfolio service is a simple one: for more of our clients’ wealth to be passed on to their family.”

The value of investments can fall as well as rise in value and investors may not get back the full amount invested, although may still benefit from a 40 per cent IHT saving if the qualifying criteria has been met. Tax treatment depends on the specific circumstances of each individual and may be subject to change in the future.
Number of UK estates paying inheritance tax hits 40-year high
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