TIME Investments, a leading provider of Inheritance Tax solutions, has launched a new online Inheritance Tax Planning Hub to help advisers increase their expertise in this complex area of financial planning, thereby adding further value to their clients and their families.

Often viewed mainly as a tax that only the very wealthy would expect to pay, Inheritance Tax (IHT) is frequently misunderstood or ignored and, as a result, is affecting more families every year. IHT receipts have doubled over the last decade and in the 2020/21 tax year, HMRC collected a staggering £5.4 billion in IHT receipts.[i]  This means that IHT is affecting thousands of bereaved families who may have been unaware that their inheritance could be drastically reduced.

TIME Investments has also partnered with Intelligent Partnership to launch the third edition of its popular ‘Adviser’s Guide to Business Relief’, which is now available.  The guide qualifies for four hours of structured CPD and was the first of its kind when the original guide launched in 2018. The guide has helped thousands of advisers and paraplanners become more familiar with and confident using Business Relief.

TIME Investments is a market leading Business Relief (BR) provider and manages over £1 billion of BR assets, including the longest running BR service in the market. TIME Investments offers free access to the guide, which is designed to support both advisers new to BR as well as those already familiar with it as an effective IHT planning route.

Henny Dovland, TIME Investments’ IHT technical specialist said: “With property values continuing to rise, many families are being pushed above the frozen nil rate bands and becoming liable to IHT. IHT is often called the “voluntary” tax as, with careful planning, there are many simple and legitimate ways advisers can help their clients reduce their exposure to this tax.

“With trillions expected to pass between the generations over the next three decades, this presents a unique advice opportunity for financial advisers and planners.[ii] Intergenerational planning has never been more important, which is why we have launched the new Hub and the latest edition of the Business Relief guide to help advisers identify these planning opportunities.”

 

Areas to consider with Inheritance Tax planning

Henny sets out the following areas to think about when considering IHT and intergenerational financial planning:

 Assessing retirement income

Consideration needs to be given to how much income is required in retirement and how long this income needs to last.  The next step is to establish whether they can reach that income target based on an assessment of assets.

Where there are surplus assets, it might be time to assess IHT planning. There are several tax-efficient ways to pass assets to descendants, but these have different constraints and obligations.

The easiest route may be to pass cash to family members. However, aside from the use of small and annual gift allowances, larger gifts typically take seven years to fully fall outside of the taxable estate.

 

Home is where the heart is

How people deal with the family home is also an area where advisers can add significant value. The nil rate band (NRB) is fixed at £325,000, the latest freeze means it will have remained at the same level for 17 years by 2026. Anyone with an estate exceeding that figure is potentially liable for IHT.

Clearly this is an issue given today’s escalating house prices. In response, the Government introduced the residence nil rate band (RNRB) in April 2017, which now allows qualifying homeowners an additional £175,000 before they are subject to IHT.

Passing the family home to the next generation is an enormous emotional (as well as financial) move and ensuring this is done in the most effective way for all concerned is important. Here advisers should make best use of the RNRB.

There are complex rules around how the RNRB works, and only direct descendants can inherit the family home. Married couples leaving their assets to each other may transfer the RNRB to the surviving spouse allowing them to use up to twice the tax-free allowances available to an individual.

 

Super savers

ISA holdings, whilst tax-efficient during a saver’s lifetime, form part of the taxable estate for IHT purposes. A surviving spouse or civil partner can inherit ISA funds from their deceased partner or make an additional ISA subscription up to the value of their deceased partner’s ISA holdings. It is possible to invest ISA funds in AIM listed companies that can qualify for 100% IHT relief after two years of ownership.

 

Top tips for effective intergenerational financial planning

  1. Start intergenerational planning early to avoid time restrictions
  2. Consider the wider family and younger generations
  3. Understand financial planning strategies that can benefit several generations simultaneously
  4. Think about including Business Relief as part of IHT planning
  5. Use the RNRB to full effect
  6. Revisit trusts to assess their effectiveness for today’s families
  7. Use pensions as an efficient means of protecting the legacy
  8. Ensure clients do not pass on too much too soon and lose control or become dependent
  9. Review everyone’s circumstances regularly

 

To find out more about Inheritance Tax planning, please contact us on 020 7391 4747 or questions@time-investments.com.

 

 

Important information

The information contained in this article does not constitute and should not be construed as constituting investment or any other advice by TIME Investments. The levels and bases of, and reliefs from, taxation may change in the future. Any favourable tax treatment, such as Business Relief, is subject to government legislation and as such may change. Investors in Business Relief investment should recognise that their capital is at risk and they may not get back what they invest.

 

Coverage:

Financial Planning Today

International Adviser

 

Sources:

[i] ‘Inheritance tax statistics: Table 12.1 – analysis of receipts’, July 2021

[ii] ‘Passing on the Pounds’, Kings Court Trust, 2017

Posted: 08/04/2022 Categories: Inheritance Tax, News, Press

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