Who could benefit from making IHT-free investments?
Archived article: please remember tax and investment rules and circumstances can change over time. This article reflects our views at the time of publication.
This article is adapted from Octopus Investments' publication "Identifying clients who could benefit from BPR-qualifying investments" and it is reproduced with its permission. Read more about Octopus Investments.
The article has been written in accordance with Octopus Investments’ understanding of the law and interpretation of it at the time of publication: remember tax rules can change and benefits depend on circumstances.
Investments that qualify for Business Property Relief (BPR) can be passed on free from inheritance tax upon the death of the investor, provided the shares have been owned for at least two years at that time.
Below are some of the more common scenarios where a BPR-qualifying investment could be used to reduce an inheritance tax liability.
The example scenarios that follow are for illustration purposes only and assume that the nil-rate band is offset against other assets. It is important to note that the risk profile of each portfolio, and any investment growth or losses, is likely to differ. The tax benefits of the BPR portfolios could mitigate the additional risks investors are taking with their money. The scenarios assume the costs for each portfolio are the same, but actual costs may be different.
Key investment risks
- The value of a BPR-qualifying investment, and any income from it, can fall as well as rise. Investors may not get back the full amount they invest.
- Tax treatment depends on individual circumstances and could change in the future.
- Tax relief depends on portfolio companies maintaining their BPR-qualifying status.
- The shares of unlisted or smaller companies (including AIM-quoted shares) could fall or rise in value more than other shares listed on the main market of the London Stock Exchange. They may also be harder to sell.
- BPR-qualifying investments are not suitable for everyone. Neither Wealth Club nor Octopus Investments offer investment or tax advice or personal recommendations. If you are unsure an investment is right for you, please seek specialist advice.
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.