Our founder Jessamy Walker is featured in the Times report for Best Financial Planners in the Country and she is often sought out for her expert opinion and sound insights into lifestyle financial planning. Recently she was approached by Octopus Investments as part of a large research project in to BPR (Business Property Relief) estate planning. The research wanted to ascertain whether BPR was being used to help people reduce the amount of inheritance tax their loved ones will pay, while still being able to sustain a good lifestyle after retirement and being able to take care of themselves.
Inheritance Tax
The amount someone can pass on free from Inheritance Tax (the nil-rate band) has been frozen at £325,000 since 2009. More people than ever are set to face an inheritance tax bill because of rising house prices and stock markets. The amount of inheritance tax collected is predicted to reach £6.9 billion by 2023 –24. That’s an increase of £1.5 billion in just five years.
This means that inheritance can be an issue for even quite modest estates, something many people don’t realise. In fact, many clients are often astonished when they see the Inheritance Tax figure their family are likely to pay. You really don’t need a huge amount of wealth for your family to end up paying a large amount of Inheritance Tax.
Why do people avoid Estate Planning?
Lack of knowledge can be one issue for people avoiding estate planning. However, there are often other reasons as well as the Octopus Investments Research found. These include:
| They don’t see the urgency | 57% |
| They don’t want to lose access to their assets | 55% |
| They don’t want to think about their own death | 33% |
| They don’t know they should be doing it | 25% |
Jessamy explains:
“It is really a control aspect where clients are worried about whether they can afford to give their money away (to Trust or children) and are also increasingly wary of giving gifts.
People are also living longer and that can be a worry as people get concerned they won’t have the finances available be able to look after themselves. None of us want to be a burden on our children.
If we can do some planning that means they feel able to live a good life and retain the ability to pay for care or help if they need it, that can be really reassuring and powerful.
That’s where BPR qualifying investments come in. These are investments that stay in the client’s name rather than gifting money away into a Trust for example. They are quick to become inheritance tax-exempt, all of which tends to make the conversation a lot easier!“
What are Business Property Investments?
Business Property Relief (BPR) qualifying investments are investments in the following kinds of businesses that carry on a trade rather than investment activities, such as:
- Shares in qualifying companies not listed on any stock exchange.
- Shares in qualifying companies listed on the Alternative Investment Market (AIM).
- An interest in a qualifying business, such as a partnership.
Many business owners are not aware that the shares they hold in their companies are so tax efficient. When they either sell or close down their companies, often these tax reliefs are lost.
Other benefits to BPR qualifying investments
BPR qualifying investments are especially beneficial for clients who have delayed estate planning until later in life. This is because they only have to be held for just two years before qualifying for nil Inheritance Tax.
Many clients like the idea of BPRs as they often mean that their money is helping small UK businesses grow. It can also mean that they are investing in sustainable businesses, such as solar power.
If you would like to discuss Business Property Relief, Estate Planning or Inheritance Tax, please get in touch with us.
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