minimising inheritance tax

Minimising the Inheritance Tax Bill

havenifa

havenifa


Posted on: 19th May 2022

Mitigating inheritance tax is not just something reserved for the super-wealthy. High net worth individuals also have the potential to greatly benefit when exploring more tax-efficient avenues. When an individual wants to pass on an estate that has a worth of £5m – currently liable for 1.8m in inheritance tax – there would be an interest in exploring the alternative options to better shield their assets and minimising inheritance tax.

Options

The most common route in inheritance tax planning is around forming a well-defined, cohesive will – or gifting sums of money to potential inheritors in advance. Another option is forming a trust.

Whilst these are proven effective ways of managing inheritance tax, they can be limited (with the annual gift allowance being £3,000 within the 7 years leading to death) or have complicated processes such as setting up inheritance funds. The other popular method of limiting inheritance tax liability is investing capital into a tax-efficient investment scheme that provides inheritance tax exemption. This has been especially beneficial for seasoned investors.

These schemes allow for considerable values of shares to be passed on from investors free from inheritance tax.

EIS

The better-known schemes are those that are government-led investment schemes facilitating private investment into early-stage companies. The Enterprise Investment Scheme (EIS) is something that has grown considerably in popularity over the last 25 years, thanks in part to the generous tax reliefs investors receive of.

Among the many tax advantages, inheritance tax relief is one of the most effective for shielding capital – and one that many investors remain unaware of as an option. Investors stand to benefit from full inheritance tax exemption, enabling them to pass on their share’s entire value without any deductions – providing they have been held by a minimum of two years.

The EIS’s maximum investment amount of £1m makes it one of the most desirable options for high net worth individuals holding onto significant estates.

Other Benefits

Unlike where trusts have an individual having to hand over immediate control of funds to their beneficiaries, EIS shares are retained under direct ownership of the investor for the duration of their life.

This allows for the shielding of thousands or millions of pounds of hard-earned assets from growing tax deductions and making it easy to manage with full control.

For more information about how an Enterprise Investment Scheme can fully benefit you in your estate planning, always consult with independent financial advisers Manchester to be sure you are getting the right advice and answers.

Contact the team at Haven IFA today to discuss avenues for inheritance tax relief, minimising inheritance tax, and your financial future.

Posted in IHT