More people than you might imagine could be facing a potential IHT liability. By using the UK’s leading financial classification data – Financial ACORN (2008) – we’ve identified as many as nine million people who might benefit from good IHT planning. Take a look at the different groups to see how you could help them.
Click on each heading to find out more:
This group makes up 2.9% of the UK population - that’s around 1.7 million people.
| Why are they a key IHT target? |
What IHT solutions should they consider?
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- Their income is four times more likely to be in the top income brackets.
- They’ll already own a large portfolio of investments which form a big part of their estate.
- They’ll usually live in large, detached homes and although they have mortgages, they’ll be in the process of paying them off.
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- Their high income levels could give them scope to use the normal expenditure out of income exempt transfer.
- If they own ISAs or PEPs they can’t be put in trust so will immediately form part of their estate on their death. An onshore or offshore bond in a loan trust could be a better home. This still gives them access to the money and the growth will immediately be out of their estate.
- Already being keen investors, they might be interested in some of the investments they can make that qualify for relief from IHT, for example, AIM-listed shares or farmland and forestry.
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This group makes up 3.0% of the UK population – that’s around 1.8 million people.
| Why are they a key IHT target? |
What IHT solutions should they consider?
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- They’re likely to live in high value homes.
- Owning their home outright is one and a half times more likely than the average.
- Being self-employed is above average.
- They’re keen investors with high incomes.
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- For many in this group, their house is likely to form the biggest part of their estate. They could consider releasing some equity from their house and use the capital generated to buy an onshore or offshore bond and place it in a discretionary gift trust. The gift will be out of their estate if they live for more than seven years after making it and they can change or add beneficiaries at any time. This is particularly useful for generation planning. They should remember that any gift amount above the nil rate band will be subject to 20% tax.
- Making use of exempt transfers or gifts, for example, gifts to charities, can be an effective way of reducing the value of their estate.
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This group makes up 1.9% of the UK population – that’s around 1.1 million people.
| Why are they a key IHT target? |
What IHT solutions should they consider?
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- They’re more likely to own their home with a small mortgage in relation to the value of their property.
- Household income is above average.
- They’re over two and a half times more likely to be self-employed than average.
- These people are keen on gilts and multiple stockmarket investments.
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- Early planning is essential as the sale of a business in the future could dramatically increase the value of their estate. Freeing up capital from existing investments, investing it in an onshore or offshore bond and placing it in the appropriate gift trust can help reduce their estate value.
- They could use the yearly IHT exemption to give away £3,000 each year.
- They can make gifts that are part of their normal expenditure from any spare taxed income they have.
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This group makes up 3.2% of the UK population – that’s around 1.9 million people.
| Why are they a key IHT target? |
What IHT solutions should they consider?
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- Most own their own home but still have a mortgage.
- They have above average incomes.
- They have lots of stockmarket investments but pension provision is around average.
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- Income in retirement could be an issue. An onshore or offshore bond, placed in the appropriate trust can help reduce the value of their estate at the same time as allowing them to top up their pension income.
- Equity release or downsizing to free up capital for IHT planning could be an option for pensioner couples. They could then use the appropriate gift or loan trust to remove capital from their estate.
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This group makes up 4.3% of the UK population – that’s around 2.6 million people.
Why are they a key IHT target?
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What IHT solutions should they consider? |
- Many will own their home outright.
- In the main, children will have left home.
- Savings and stockmarket investments are around average.
- These people aren’t financially sophisticated so could be sitting on a potential IHT liability without noticing it.
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- They need to work out the value of their estate. Our online IHT calculator can help them with this.
- Where a potential IHT liability has been identified, they can move their savings and investments into an onshore or offshore bond and place it in the appropriate trust.
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A comprehensive trust range and quality onshore and offshore bonds give you the flexibility needed to meet many of these customers IHT planning needs.