Inheritance Tax (IHT) kicks in to estates valued at over £325,000. If you have a house (especially in the South East) that means it may well apply to you.The potential IHT bill can be pretty large. It's applied at a flat 40 per cent above the threshold. Here's a worked example offered by the Inland Revenue. Visit the HMRC site here.
Your estate is worth £500,000 and your tax-free threshold is £325,000. The Inheritance Tax charged will be 40% of £175,000 (£500,000 minus £325,000).
The Money&Co. Inheritance Tax Service is an innovative approach to mitigating Inheritance Tax through Business Relief. By creating a lending vehicle that holds loans from the Money&Co. platform, investors are not required to pay Inheritance Tax on the value of their portfolio, and additionally benefit from a fixed yield of 8 per cent on the loans, before our fee of 1 per cent per annum. Business Relief gives Inheritance Tax exemption on the value of shares in unquoted companies that have been held for at least 2 years and which are involved in a qualifying trade. Lending is a qualifying trade under Business Relief rules. The service is only available to sophisticated and high-net-worth investors and the minimum investment is £150,000
IHT Tax-Planing Advantages
You are not required to pay Inheritance Tax on the value of your portfolio.
You retain control of your capital.
After the payment of Corporation Tax, income can be reinvested, increasing the pot of assets in an inheritance tax-free environment.
You can pass assets to your children tax-free after two years, whilst still retaining control.
The recently launched £150,000 property-backed loan, North-East Property Investment, has a fixed-rate yield of eight per cent over three years. It's 51 per cent subscribed at the time of writing.As ever, we've made our best efforts in due diligence and credit analysis before awarding this loan an A rating. However, we cannot warrant that the representations of the borrower are true – though clearly we believe them to be so. We offer an excerpt from those representations – available to registered lenders – below.
Please remember there is always an element of risk, and capital loaned is at risk. See risk warnings at the foot of this article, on our Home page and in FAQs on site.
A Process Guide To Innovative Finance ISA Investment
Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee). That figure is the result of almost £15 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders' capital is at risk. Read warnings on site before committing capital.All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income.Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.So here's our guide to the process:
Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
Step 3: Buy loans in the loan market. Once you've put cash in your account it will sit there - and it won't earn interest until you've bought a piece of a loan. It's this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans - all loans on the Money&Co. site can be held in an IFISA - and your money will start earning tax-free interest.
The ISA allowance for 2019/20 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We're assuming a 7 per cent return, net of charges and free of tax here.Once you have made your initial commitment, you might then consider diversifying - buying a spread of loans. To do this, you can go into the "loans for sale" market. All loans bought in this market also qualify for IFISA tax benefits.