IHT Liability and Business Relief Investment
Discussion
My IFA has suggested selling some of my shareholdings to buy a Business Relief Investment. I can see the benefits but:-
1. I live on the dividend yield on those shares. Not sure I can draw dividend income from business relief investments? I certainly don’t want to reduce my income.
2. Is it really worth doing given that I’d have a substantial CGT liability if I sell shares to buy the Business Relief Investment ?
1. I live on the dividend yield on those shares. Not sure I can draw dividend income from business relief investments? I certainly don’t want to reduce my income.
2. Is it really worth doing given that I’d have a substantial CGT liability if I sell shares to buy the Business Relief Investment ?
Would the BR-qualifying investments be paying much of a dividend, if at all?
Undoubtedly there are benefits from an IHT perspective, provided that you survive the required two years of course. An obvious downside is the increased level of risk, especially in terms of volatility and liquidity.
How comfortable are you with the extra risk?
Undoubtedly there are benefits from an IHT perspective, provided that you survive the required two years of course. An obvious downside is the increased level of risk, especially in terms of volatility and liquidity.
How comfortable are you with the extra risk?
C69 said:
Would the BR-qualifying investments be paying much of a dividend, if at all?
Undoubtedly there are benefits from an IHT perspective, provided that you survive the required two years of course. An obvious downside is the increased level of risk, especially in terms of volatility and liquidity.
How comfortable are you with the extra risk?
The risk is ok if spread properly. I don’t want reduced income though.Undoubtedly there are benefits from an IHT perspective, provided that you survive the required two years of course. An obvious downside is the increased level of risk, especially in terms of volatility and liquidity.
How comfortable are you with the extra risk?
CGT is notably less than IHT, even at the higher rate. Plus it's only applied to the gain, not the whole amount like with IHT (assuming we're just talking about sums over NRBs and in the firing line for IHT).
How about use some of your money to buy an annuity to replace the lost dividends. That's a guaranteed income stream for life and uses up some of your capital which indirectly saves IHT. An annuity effectively lets you spend both the 'income and the capital' without the risk of it being depleted.
Then you'd be free to invest what's left in BPR, qualifying for IHT relief after holding it for 2 years. Has to still be held until death mind you. Also, watch out for the tapering of the RNRB at £2m+, because the value you hold in BPR assets still counts towards that.
How about use some of your money to buy an annuity to replace the lost dividends. That's a guaranteed income stream for life and uses up some of your capital which indirectly saves IHT. An annuity effectively lets you spend both the 'income and the capital' without the risk of it being depleted.
Then you'd be free to invest what's left in BPR, qualifying for IHT relief after holding it for 2 years. Has to still be held until death mind you. Also, watch out for the tapering of the RNRB at £2m+, because the value you hold in BPR assets still counts towards that.
IMO "business property relief" is best suited for business owners who play a part in management of their business or at least have a good knowledge of what's going on in the management. Personally I wouldn't want the risk of buying and holding an arms-length investment, such as AIM shares, just for the BPR.
I looked into this when I also looked at buying a JL second death cover to compensate for the amount of IHT potentially due.
I concluded ( we concluded ) that my children would already be ok and the monies that we might spend on either “ purchases “ could be better used for us to spend !
The life cover was particularly “ expensive “ as a ratio of return on potential IHT saved.
I’ve invested otherwise in VCT ‘s and EIS ‘s for years and for the former have always seen divs of somewhere between 5% and 11% in totality on the net of tax relief gross.
However I’ve always tried to look at the investment quality itself rather than be swayed by the tax relief.
VCT’s in particular are also losing their 30% relief from April as for reasons best known to Rachel that rate has been cut to 20%.
I concluded ( we concluded ) that my children would already be ok and the monies that we might spend on either “ purchases “ could be better used for us to spend !
The life cover was particularly “ expensive “ as a ratio of return on potential IHT saved.
I’ve invested otherwise in VCT ‘s and EIS ‘s for years and for the former have always seen divs of somewhere between 5% and 11% in totality on the net of tax relief gross.
However I’ve always tried to look at the investment quality itself rather than be swayed by the tax relief.
VCT’s in particular are also losing their 30% relief from April as for reasons best known to Rachel that rate has been cut to 20%.
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