Investors urged to seek advice on impact of Finance Act 2015

With a significant amount of people’s wealth in the UK tied up in their home, the new rules will give families the opportunity to secure that wealth for future generations.

The legislation will see the gradual introduction of a residential nil-rate band in addition to the existing £325,000 nil-rate band.

Responding to this change, Managing director at Octopus Investments, Paul Latham, said: “We encourage people to speak with their financial adviser or solicitor to ensure that their will makes the most of the revised allowances, and to consider other appropriate estate planning solutions that ensure maximum benefit for their beneficiaries.

However, despite the benefits many people will still be affected by inheritance tax.

The nil-rate band and residential allowance combined will only reach a maximum of £1 million in 2020, and then only for couples – with married couples and civil partners benefitting from their allowances automatically switching to the surviving spouse.

Furthermore, the existing nil rate band has remained frozen at £325,000, and high value estates will not benefit from the additional residential allowance as it is scaled back on estates worth over £2 million.

Given rising property prices, many thousands of estates will continue to be impacted by potentially sizeable inheritance tax bills.

Offering advice on the issue, Mr Latham added:  “Investors have a number of options available to them when planning to pass on their estate, including investing in companies that qualify for Business Property Relief (BPR).

“Since its introduction in 1976, BPR has incentivised investment into many smaller businesses, helping them to fulfil their growth potential while aiding investors through the inheritance tax exemption it offers after two years.

“Unlike with making a gift or settling assets into trust, the investor retains control over the investment, and can sell their shares if they need to. However, money taken out of the investment will no longer be exempt from inheritance tax.

“With the state pension age on the rise and the unpredictability of later years and cost of potential care to consider, the challenge for many people is knowing how much to retain to provide for their own future.

“Investments in shares that qualify for Business Property Relief can give investors greater levels of access to and control of their assets than other estate planning solutions, so they can be flexible in their planning.”