HOW TO BEAT THE
INHERITANCE TAX TRAP
SPONSORED BY
◆ Who Is This Guide For? ◆
This guide is for sophisticated and high net worth
investors.
You are a high net worth individual if you earn £100,000
or more a year or have at least £250,000 of assets, not
including your main home and your pension. You would
qualify, for instance, if you own £250,000 worth of shares
or a second home with equity of £250,000 or more.
A sophisticated investor is someone who has
sufficient experience, capital or net worth to engage
in more advanced investment opportunities. You are
a sophisticated investor if you have: worked in private
equity, been a director of a company with an annual
turnover of over £1 million, been a member of a business
angel organisation, or made more than one investment in
an unlisted company in the last two years.
IMPORTANT NOTE
This guide, like the service Wealth Club Limited offers, is not
advice or a personal recommendation. This is a quick summary
of a complex subject and does not cover every nuance. You
should not make – or refrain from making – any decision
based solely on the content of this guide. If you are unsure an
investment is right for you, please seek professional advice. We
have made every attempt to ensure the information in this guide
is correct and accurate (April 2022), but cannot guarantee it.
Wealth Club | Clubfinance Guide to IHT | April 2022
Have a question? Do contact us
If you have questions on anything mentioned in this
guide, please do call us on 0117 929 0511. You’ll hear no
automatic menu options – you will get straight through
to someone who knows what they’re talking about.
You can also email enquiries@wealthclub.co.uk. We
don’t offer personal advice or recommendations; you
must always form your own opinion. What we aim to do
is lay out available information in a way that’s helpfully
clear, balanced and useful to you.
Wealth Club offers impartial information on taxefficient investments and allows you to apply online at
www.wealthclub.co.uk.
REMEMBER, TAX RULES CAN CHANGE AND BENEFITS
DEPEND ON CIRCUMSTANCES. CAPITAL IS AT RISK. IF IN
DOUBT, PLEASE SEEK SPECIALIST ADVICE.
© Wealth Club 2022. This financial promotion is issued by Wealth Club
Limited and is a marketing communication. Wealth Club has received a
contribution from Octopus Investments, the sponsor of this guide. Wealth
Club Limited is authorised and regulated by the Financial Conduct Authority,
Register Number 725176. Wealth Club Asset Management (trading as
Clubfinance) is a wholly owned subsidiary of Wealth Club Limited. The
registered office for both is 20 Richmond Hill, Bristol, BS8 1BA, UK.
Page 2
◆◆
The 'Most Hated' Tax Of All
I
nheritance Tax (IHT) is regularly described as the most
unjust and hated of all taxes. After all, if you have already
paid tax during your lifetime, why should anything you
leave behind be taxed again – and at a whopping 40%? It is
a tax on money that has already been taxed.
Please remember though, IHT planning is a complex
subject. How it will affect you and which course of action is
best will depend on your circumstances and, furthermore,
tax rules can change. If you are in any doubt, you should
seek specialist advice.
From April 2021 to February 2022, HMRC collected £5.5
billion in inheritance tax. With the five-year freeze on
inheritance tax allowances announced in the March 2021
Budget, that number is forecast to reach £6.6 billion by
2026.
What IHT is – and how it works
IHT is Inheritance Tax. If your estate exceeds a certain
amount when you die – currently £325,000 plus an
additional allowance of up to £175,000 for your home – it
is likely to attract IHT at a flat rate of 40%. The £325,000
threshold is known as the nil-rate band, the amount up to
which a rate of ‘nil’ tax is charged. It was set at the current
level in 2009 and has now been frozen until 2026. The
additional allowance is the residence nil-rate band. We
explain more overleaf.
So what could you do to prevent the taxman from taking
a large portion of the assets you have put by for your loved
ones?
It is simpler than many think to mitigate – even completely
eliminate – any IHT liabilities your estate may have, using
government-sponsored schemes.
Before you read any further, you may like a quick reminder
of how IHT currently works. The sums involved may be
very substantial, so it merits close attention.
Page 3
Your estate is the total value of all the assets to which you’re
beneficially entitled (e.g. property, savings, investments,
etc.) less any liabilities (e.g. loans, credit cards, mortgage).
It’s important to note your pension or drawdown plan
are not included; they normally sit outside your estate at
death for IHT purposes.
Wealth Club | Clubfinance Guide to IHT | April 2022
The excess could be subject to a tax charge of 40%. This
could decrease to 36% if you leave at least 10% of the net
estate to a Registered Charity.
The band is transferable, which means it is possible to
benefit from a deceased spouse’s or civil partner’s unused
residence nil-rate band.
Married couples and civil partners are allowed a tax break.
When one dies, the whole or part of their estate can be
passed on to the other completely tax free. If all of the
assets of one are left to the other, none of the first spouse’s
or civil partner’s nil-rate band is used.
But there are a few details of which to be aware.
So when that partner in turn dies, they can add their
deceased spouse’s or civil partner’s unused nil-rate band
allowance to theirs, and potentially pass on up to £650,000
tax free. However, this does not apply if you are an
unmarried couple. Below are some examples.
Example 1 – Single person, no children
Total value of all assets
Total liabilities
Estate
£1,250,000 –
£30,000 =
£1,220,000 –
IHT nil-rate band
£325,000 =
Chargeable estate
£895,000 x
IHT
Tax payable
40% =
£358,000
Example 2 – Widow/widower or surviving civil partner, no
children
Total value of all assets
Total liabilities
Estate
£1,250,000 –
£30,000 =
£1,220,000 –
Own IHT nil-rate band
£325,000 –
Spouse/civil partner's
IHT nil-rate band
£325,000 =
Chargeable estate
£570,000 x
IHT
Tax payable
40% =
£228,000
Both examples assume the current nil-rate band of £325,000. Example 2
assumes the deceased didn’t use any of their allowance, i.e. their whole
estate was passed on tax free to their spouse or civil partner on their
death.
What is the residence nil-rate band?
The ‘residence nil-rate band’, which became available in
2017, is an additional nil-rate band which applies to an
individual’s residential property. It is £175,000 for the
20212/23 tax year and will remain at this level until 2026
(as announced in the March 2021 Budget).
Firstly, the residence nil-rate band only applies to one
property which has been at some point your ‘residence’,
provided you owned it on or after 8 July 2015. A property
that has never been your residence does not qualify.
Secondly, if more than one of your properties was at some
point your main residence, you can only use the allowance
against one; your personal representatives can nominate
a property. If you don’t own a residential property, this
allowance can’t be applied.
Thirdly, the allowance only applies if you pass a residence,
or the proceeds from selling it, to ‘direct descendants’: your
children (including step-children and adopted children)
and their children. It does not apply if you bequeath your
home to nephews, nieces, your parents, siblings or cousins.
And lastly, the residence nil-rate band will be tapered for
estates worth more than £2 million. For every £2 your
estate is over £2 million (after deducting liabilities but
before reliefs and exemptions), the residence nil-rate band
will decrease by £1. That means if your estate’s net value
is £2,350,000 or more, your residence nil-rate band should
be zero; your estate will not qualify for this additional
allowance and is likely to attract 40% IHT on any value in
excess of the basic nil-rate band allowance (see examples
and chart overleaf).
So, suppose you find the nil-rate bands still leave your
estate exposed to IHT. What could you do to save your
loved ones from having a large slice of your bequest
taken away by the taxman?
There are a number of options, and you might want to
consider using a combination of them.
In this guide we explain four of the most common.
Remember, IHT planning can be complex: if you are
unsure please seek expert advice.
This means that currently a single person could have a
total IHT-free allowance of £500,000 (£325,000 nil-rate
band, plus £175,000 residence nil-rate band). This could
double to £1 million for married couples and civil partners.
Wealth Club | Clubfinance Guide to IHT | April 2022
Page 4
Example 3 – Single person with children and/or
grandchildren
Example 4 – Widow/widower or surviving civil partner
with children and/or grandchildren
Total value of all assets (excl.
main residence)
£350,000 +
Total value of all assets (excl.
main residence)
£350,000 +
Main residence
£900,000 –
Main residence
£900,000 –
Total liabilities
Estate
£30,000 =
£1,220,000 –
IHT nil-rate band
Residence nil-rate band
£1,220,000 –
Own IHT nil-rate band
£325,000 +
£175,000 =
Spouse/civil partner's
IHT nil-rate band
£325,000 +
£500,000
Chargeable estate
£720,000 x
40% =
Tax payable
£30,000 =
Estate
£325,000 +
Total IHT free
IHT
Total liabilities
£288,000
Own residence nil-rate band
£175,000 +
Spouse/civil partner's
residence nil-rate band
£175,000 =
Total IHT free
£1,000,000
Chargeable estate
Again, these examples assume the current nil-rate band of £325,000
and that the first of the couple to die didn’t use any of their allowance, i.e.
their whole estate was passed on tax free to their spouse or civil partner.
£220,000 x
IHT
40% =
Tax payable
£88,000
How will the residence nil-rate band taper work for a single person?
£150,000
£125,000
£100,000
£75,000
£50,000
£25,000
£0
£2,000,000
£2,010,000
£2,020,000
£2,030,000
£2,040,000
£2,050,000
£2,060,000
£2,070,000
£2,080,000
£2,090,000
£2,100,000
£2,110,000
£2,120,000
£2,130,000
£2,140,000
£2,150,000
£2,160,000
£2,170,000
£2,180,000
£2,190,000
£2,200,000
£2,210,000
£2,220,000
£2,230,000
£2,240,000
£2,250,000
£2,260,000
£2,270,000
£2,280,000
£2,290,000
£2,300,000
£2,310,000
£2,320,000
£2,330,000
£2,340,000
£2,350,000
Residence nil-rate band (2021/22 until 2026)
£175,000
Value of estate
Page 5
Wealth Club | Clubfinance Guide to IHT | April 2022
◆◆
Have You Made A Will?
M
aking a will is the most basic – but surprisingly
often neglected – form of estate planning. Indeed,
more than half UK adults do not have one.
The lack of a will can add strain and distress to the surviving
family at arguably the worst time. But that’s by no means the
only consequence of ‘dying intestate’, i.e. without a will.
Unless your estate or family setup is very simple, it is important
to make a will, revise it regularly and keep it up to date.
What happens if you do die intestate? No matter what
your wishes may have been, your estate will be distributed
according to set rules. This means a larger portion of your
estate may go to the taxman.
Children will share half of anything above £270,000 but
will have to wait until they’re older than 18. The amount
that goes to your spouse or civil partner will be IHT free.
The amount that goes to your children will use your nilrate band, and, if greater than £325,000, could be subject to
IHT.
♦ If you are single, your entire estate – minus any IHT
payable – goes to surviving blood relatives in a set order.
Children come first, followed by parents, siblings, nieces
and nephews. In the absence of any blood relatives your
estate goes to the Crown.
It’s important to note that unmarried couples are treated
as single. If one of you dies without a will, the other is
entitled to nothing.
♦ If you are married or in a civil partnership and have no
children, your estate will go wholly to your surviving spouse
or civil partner. The estate will be passed on free from IHT.
♦ If you are married or in a civil partnership and do have
children, the surviving married partner will take the first
£270,000 and then be fully entitled to half of the rest.
Wealth Club | Clubfinance Guide to IHT | April 2022
Page 6
◆◆
Should You Make Gifts?
G
iving your assets away during your lifetime may
be a simple way to cut the potential IHT bill to
which your estate could be subject on death.
Some gifts are usually free from IHT (such as under the
annual and small gift exemptions). Others (Potentially
Exempt Transfers or PETs) only become completely free
from IHT after seven years. So if you die before the seven
years are up, IHT might be due, albeit potentially at a
lower rate than 40% (see ‘taper relief’ below).
Tax-free gifts
You can give unlimited amounts tax free to your spouse or
civil partner, provided you’re both domiciled in the UK.
Your gift will be immediately outside your estate, but will
become part of theirs.
You have an annual £3,000 tax-free gift allowance, known
as the annual exemption. If you haven’t used your annual
exemption fully in the previous year, you can combine it
with your current year’s allowance.
You can also make unlimited tax-free small gifts (up to
£250 per recipient each year). However, you cannot use
Page 7
your annual exemption and your small gift exemption for
the same person in the same year.
In addition, you can give immediately IHT free:
♦ Donations to recognised charities, national museums,
universities, political parties and some other institutions
♦ Any part of your income you regularly give away,
provided you can demonstrate this does not affect your
standard of living
♦ Wedding gifts: up to £5,000 to your child; up to £2,500
to your grandchild; up to £2,500 to your spouse or civil
partner to be; £1,000 to anyone else
♦ Maintenance gifts: to a current or former spouse or civil
partner, an infirm dependant or children in education.
Gifts that may be tax free
Most gifts you make during your lifetime, except those
above, are ‘potentially exempt transfers’: they are
completely IHT free if you survive seven years after the
gift. If you die within seven years, the total value of the gifts
Wealth Club | Clubfinance Guide to IHT | April 2022
will be included in your estate and use up part or all of the
nil-rate band.
If the value of those gifts exceeds the nil-rate band, your
estate may have to pay IHT at the full rate or at a discounted
rate, known as ‘taper relief’, depending on when you died.
You should also consider that, for gifts to become
completely IHT free, you need to live for at least another
seven years. If you like the idea of giving assets or money
to your loved ones during your lifetime, using your annual
and small gift exemptions might be sensible. It is also
simple and straightforward and you can make sure each
recipient receives exactly the amount you intend.
How does taper relief work?
Number of years between Proportion of
gift and death
40% IHT payable
0-3
100%
3-4
80%
4-5
60%
5-6
40%
6-7
20%
7+
nil
Nobody knows when they’re going to die, and seven years
is a long time. Some might feel giving up their wealth
during their lifetime, with no certainty this will be effective
for estate planning, makes larger gifts less attractive.
Another reason why many don’t like to give away large
sums is concern over what the recipient might do with the
gift or what might happen to the gift should the recipient’s
circumstances change (e.g. divorce or bankruptcy).
What are the drawbacks?
At first sight there are no drawbacks other than the
obvious: you lose control of that asset. So you need to
consider how much you can afford to give.
Wealth Club | Clubfinance Guide to IHT | April 2022
Page 8
◆◆
Set Up A Trust
T
rusts have been around since the time of the
Crusades when lords and knights wanted to
keep their castles out of the hands of the taxman
or crooked relatives while they were fighting in the Holy
Land.
There are different types of trust. Finding the arrangement
that can achieve what you want and ensuring it is drafted
appropriately usually requires professional legal and tax
advice. Here we provide just a brief overview of the main
types most commonly used for estate planning.
Discretionary trusts are a type of trust commonly used
to manage assets (money, investments, land or buildings).
The trustees (you could be a trustee yourself) make the
decisions about how to use the trust income and/or capital,
but cannot personally benefit from either.
Assets put (settled) into a discretionary trust usually fall
outside the settlor’s estate seven years after settlement. So,
if you die within seven years of settling assets, IHT may
still be payable by the estate – similar to the position if you
had made a potentially exempt transfer.
Page 9
You decide at the start who the beneficiaries are and who
should receive how much and when.
The flipside of this flexibility is that gifts to a discretionary
trust are treated as “chargeable lifetime transfers”. This
means that 20% IHT is immediately payable on anything
put in trust in excess of the current £325,000 nil-rate band.
In general, up to £325,000 can be put into a discretionary
trust every seven years without incurring the immediate
IHT charge.
If the settlor dies within seven years, IHT will then be
reassessed at the higher rate of 40%.
Discretionary trusts may also be subject to 10-yearly
periodic charges and proportionate exit charges. These
charges are complicated and you should seek further
technical advice if you believe such a trust would be
beneficial.
Immediate Post Death Interest Trusts are typically set
up on the death of one spouse and provide an income for
the life of the other, with ultimate ownership of the trust
Wealth Club | Clubfinance Guide to IHT | April 2022
assets passing to another beneficiary (often children) when
the second spouse dies. The assets in these trusts remain
within the second spouse’s estate for IHT purposes.
A Discounted Gift Trust (DGT) is a type of trust usually
set up in connection with an investment (e.g. a bond).
The settlor gifts a lump sum into the trust but can retain
a lifelong ‘income’ from that money (the total value of all
the income is the ‘discount’ which should be immediately
outside the estate). Any money that comes back returns
to the estate; so, if not spent, it will start to increase the
amount on which IHT is payable again. The remainder
will be treated like any other gift into a trust.
Some investors may not like the idea of trusts because,
as with gifts, once in a trust, assets are no longer in their
control. And, of course, as with some gifts, assets placed
in trust will only fall completely outside of your estate
for IHT purposes if you live for at least seven years after
establishing the trust.
As you will have gathered, the subject of trusts is complex
and trust rules are often subject to change. Moreover,
any decision you make may be irreversible. So it really is
sensible to seek professional advice before you go ahead.
What are the drawbacks?
Trusts are traditionally a staple of estate planning. They
can be very effective at reducing the value of your estate
and therefore the potential IHT charge.
On the flipside, the relevant tax and general laws are
complex. In addition, a trust might have similar obligations
to those of a company: annual accounts and tax returns
may be required and tax may be payable. So the settlor
will typically take specialist advice when establishing a
trust and the trustees may well take legal, accountancy
and investment advice as and when required.
Wealth Club | Clubfinance Guide to IHT | April 2022
Page 10
Investing In Companies Qualifying
◆◆
For Business Property Relief (BPR)
I
nvesting in companies that qualify for Business
Property Relief (BPR) is a flexible alternative that
could help you pass more of your wealth to your loved
ones, although it has its own significant investment risks.
BPR was first introduced in 1976 to allow family businesses
to be passed down through generations, free of IHT.
Its scope subsequently widened and in 1996 became
available for a range of assets, including some private or
AIM-listed companies. This has opened up an opportunity
for investors.
If you own shares – no matter how many – in a company
that qualifies for BPR, those shares could be potentially
passed on free from IHT as long as you have owned them
for at least two years and still hold them on death. No IHT
should be payable by your estate on such an investment.
sell down some or all of your investment, though this may
take some time and the money you withdraw is no longer
shielded from IHT.
Please note that this is not a tax-planning tool, it is a type
of investment that offers a tax benefit.
As with all investments, the value can fall as well as rise, so
you could get back less than you invest – potentially you
could even lose everything invested.
That said, the combination of speed, simplicity and
ability to plan during your lifetime without giving up
control makes this an increasingly popular option for some
experienced investors happy to accept the risks.
Generally, there are no complex legal structures or trusts to
set up.
Which companies qualify for BPR?
BPR-qualifying companies can be unquoted businesses,
or may be quoted on junior stock markets, such as AIM
(Alternative Investment Market). However, not all
unquoted or AIM-quoted companies qualify for relief.
Moreover – unlike the case with making lifetime gifts or
settling assets into trust – the investment is simply held in
your name. So if your circumstances change, you could
They must also be a qualifying ‘trading’ company. This
excludes companies that mainly deal with securities, stocks
or shares, land or buildings, or in the making or holding of
Page 11
Wealth Club | Clubfinance Guide to IHT | April 2022
investments. It also excludes not-for-profit organisations
and companies that are being sold or are in the process of
being wound up (except in specific circumstances).
EIS and SEIS investments should be
IHT free after two years
Provided a company qualifies in full for BPR, under
current rules an investment in its shares should benefit
from 100% IHT relief if you have held them for at least
two years and you still hold them upon death.
Investors who are not exclusively interested in IHT
mitigation might consider investments that qualify for the
Enterprise Investment Scheme (EIS) or the Seed Enterprise
Investment Scheme (SEIS).
How can you invest in BPR-qualifying companies?
One route is to invest directly, by acquiring shares in
BPR-qualifying companies. This can be daunting for
many investors without the resources or time to find and
properly assess the qualifying conditions.
Such companies are typically not managed with IHT
relief as a priority, but both generally qualify for BPR and
therefore offer IHT benefits, in addition to income tax relief
and capital gains reliefs.
Don’t forget, your investment is linked to the fortunes
of the underlying company. The capital invested is not
guaranteed: the value of your investment can fall as well
as rise; you could even lose the whole amount you invest.
Professional asset managers can help investors navigate this
risky area.
In the case of an AIM-quoted portfolio, a good investment
manager should select the portfolio companies, conduct
research, legal and financial due diligence, assess risks
and ensure rigorous control and monitoring. In the case
of an unquoted portfolio, the manager can establish and
manages the portfolio companies to ensure they qualify for
BPR as well as meet other investment objectives.
You could also benefit from some diversification. AIM
portfolios typically invest in 20-35 companies; unquoted
portfolios may have fewer holdings.
Once you invest, you will probably expect to own those
shares for as long as you live. After two years from the
date of the investment, the portfolio could be passed on
free from IHT on your death. If your beneficiaries sell
the shares, any amount raised would become part of their
estate.
Should you die before the two years have passed, the
portfolio can, as with any assets, be passed on to your
spouse or civil partner tax free, without having to restart
the two-year BPR clock. If they choose to continue to
hold the portfolio, provided the combined holding period
between both exceeds two years, the shares can be left free
from IHT upon their death.
You can find a selection of portfolios that currently qualify
for BPR on the Wealth Club website.
What are the drawbacks?
BPR portfolios are investments in shares. In order to qualify
for BPR, the company or companies invested in cannot be
listed on a main stock exchange.
Wealth Club | Clubfinance Guide to IHT | April 2022
EIS investors could currently receive up to 30% income
tax relief and defer unlimited capital gains – potentially
indefinitely, provided they made the gain up to three years
before or one year after the EIS investment. They can also
shield their investment from IHT after holding it for two
years.
SEIS investors could currently receive up to 50% income
tax relief, halve any capital gains tax due and also shield
their investment from IHT after two years.
EIS and SEIS often invest in much smaller companies
than IHT portfolios, so the risks can be even greater. In
addition, by their nature EIS and SEIS are illiquid and the
tax benefits depend on the companies retaining their
qualifying status. Tax rules can change and the value of
benefits depends on circumstances.
Find out more information about benefits and risks of EIS
and SEIS at www.wealthclub.co.uk to help you decide for
yourself if these might be worth considering.
Many of those selected within AIM portfolios are well
known businesses, in some cases larger than those listed
on the LSE. However, these companies are subject to
less stringent checks and regulations compared to a listed
business. They can in other cases be newer, smaller and
more volatile. Inevitably, this carries extra risks.
The portfolio manager will typically focus on established,
profitable and cash-generative companies. This, alongside
diversification and due diligence, could help but won’t
remove risks completely. Your investment can still go down
as well as up and you may not get back what you invested:
you may even lose your capital.
Tax rules can change and the availability of BPR will
require portfolio companies to maintain their qualifying
status – should they lose it, IHT relief would be lost too.
Page 12
BPR is assessed at death: there is no definitive list of firms
which qualify for the relief.
You retain control of your assets and can access them if need
be. However, AIM and unquoted shares are typically less
liquid than those listed on a main stock exchange, so it will
normally take longer to liquidate your portfolio.
Page 13
Lastly, shares that qualify for BPR can benefit from IHT
relief, but, unlike trusts and gifts, still form part of your
estate. This could affect how much of the residence nil-rate
band your estate could benefit from – if at all.
Wealth Club | Clubfinance Guide to IHT | April 2022
How Might You Leave
◆◆
Your ISAs Free From IHT?
T
here is £620 billion held in adult ISAs, according
to the latest figures (2019/20). Did you know
some of that money might still be subject to tax?
That’s because ISAs are normally free from income and
capital gains tax, but not from inheritance tax. So, on your
death (or your spouse’s or civil partner’s death if later)
your fund could be subject to a tax charge of up to 40%.
Since April 2015, rules are slightly more favourable
for married couples and civil partners. When you die,
your spouse or civil partner receives a one-off additional
allowance for the value of your ISA, so they can transfer it
to their ISA and keep sheltering those assets from income
and capital gains tax. Upon their death, however, the ISA
would be part of their estate and potentially subject to
IHT. The potential liability does not go away, but is only
deferred.
There is a potential solution for experienced investors
Rules effective from August 2013 allow you to hold AIM
shares in your Stocks & Shares ISA. This could be of
interest to investors with sizeable ISA assets they wish to
pass on, minus the burden of an IHT bill, to their loved
ones.
Wealth Club | Clubfinance Guide to IHT | April 2022
How so? Because companies quoted on AIM can qualify
for BPR, you could transfer part or the whole of your ISA
into an ISA portfolio that invests in AIM shares and is
managed by an asset manager who selects BPR-qualifying
companies.
To give you an idea of the impact this could have on your
IHT liability, let’s compare two scenarios: a £100,000
Stocks & Shares ISA portfolio and a £100,000 AIM
IHT ISA portfolio. With an AIM IHT ISA an investor
could pass on an extra £37,303 IHT free – you can see the
calculation and assumptions in the table overleaf.
An AIM IHT ISA is similar to the IHT portfolios described
on preceding pages of this guide, with very similar benefits
and risks. It invests in 20 to 35 companies and often targets
growth. The difference is, unquoted companies cannot be
held within an ISA.
You can make new ISA investments each year into such a
portfolio, subject to the current ISA allowance (£20,000)
or transfer existing ISAs (unlimited amounts). As your
money would still be in the ISA regime, besides shielding
your money from IHT, you would also benefit from taxfree growth and no further tax on income.
Page 14
Please remember though, an AIM IHT ISA portfolio
may be more risky, more volatile and less diversified than
a conventional, well-diversified Stocks & Shares ISA
portfolio.
Tax rules can change and the availability of tax relief
depends on portfolio companies maintaining their BPRqualifying status – should they lose it, IHT relief would
be lost too.
You can find a selection of AIM ISA portfolios on the
Wealth Club website.
Like any ISA, the investment is in your name, so you can
access your assets if need be. However, because AIM
shares are much less liquid than those listed on the main
London Stock Exchange, it will usually take longer to
liquidate your portfolio.
What are the drawbacks?
As with IHT portfolios, you are investing in companies
subject to less stringent checks and regulations compared
to a listed business. They can also be newer and smaller
businesses – making them more volatile and also more
prone to failure.
Stocks & Shares ISA
AIM IHT ISA
£100,000
£100,000
n/a
£99,000
Investment value after two years assuming no growth and allowing for ongoing
charges (i.e. 1.5% plus VAT annual management charges plus estimated
dealing charges)
£95,648
£94,692
Value lost through 40% IHT
£38,259
£0
Value of portfolio passed on
£57,389
£94,692
Current investment value
Value after dealing fee (1%)
With an AIM IHT ISA an investor could potentially pass on an extra £37,303 IHT free
Source: Octopus Investments.
This table is an illustration of tax treatment only. No investment growth or losses are assumed. In reality, the value of both investments
would be subject to market movements and investment/share price movements. It is important to note that the risk profile of each portfolio,
and any investment growth or losses, is likely to differ. The estimated annual dealing charges are 0.20%, typical for the Octopus AIM IHT
ISA. However, actual dealing charges experienced by an investor may be higher or lower. The example assumes the costs for each portfolio
are the same, but actual costs may be different. It does not include any charges paid for financial advice. Also, the current ISA provider may
charge a fee for transferring an existing ISA.
Page 15
Wealth Club | Clubfinance Guide to IHT | April 2022
◆◆
How Wealth Club Can Help
W
e hope you found this guide useful and
relevant. If you think investing in VCTs, EIS,
or SEIS might be an attractive option, our
service could be helpful.
Wealth Club is the UK’s largest broker specialising in
tax-efficient and alternative investments – thousands of
experienced investors have invested over £850 million to
date through us.
We aim to make it easier for experienced investors to
find information on, apply for and manage tax-efficient
investments. However, we will not give you advice or a
personal recommendation.
So what do you get through Wealth Club?
Free and impartial investment commentary
Access regularly updated information on VCTs, EIS, SEIS,
IHT and AIM IHT ISA portfolios all in one place:
• Expert impartial reviews of over 70 offers from all the
main providers – we regularly add new offers
• Latest performance information
• Exclusive manager video interviews
• Detailed research reports
• Free guides and factsheets
Wealth Club | Clubfinance Guide to IHT | April 2022
What our clients say
“Great service and low cost way to invest in VCTs – great
information on the website but if you have specific questions
requiring a personalized answer, nothing too much trouble
and they come back with lightning speed. Fully recommend.”
– Lori, 24 October 2021
“Customer support is top notch”
– Simon, 3 October 2021
“I am not a great lover of online business. But your site was easy to
navigate. Also when I rang with a query, the phone was answered
promptly and my questions answered to my satisfaction.”
– Mr Mike Gee, 12 September 2021
“Always helpful and keep you up to date with current offers and
situation. Discounts help as well!”
– Mrs Hockings, 10 September 2021
Page 16
The first service to offer online applications
We were the first broker to offer online VCT applications.
We work with providers to make applications short and
easy.
The first online portal for tax-efficient investments
The Wealth Club Portal is the first and only online portal
where you can log in and view your alternative investments
made through Wealth Club, in one place. Find at a glance
the most up to date valuation and your profit or loss.
Market-leading savings and annual rebates of up to
0.15% on VCTs
When you invest through us you normally pay less than if
you had invested directly with the provider or through an
adviser or another broker. In addition to the initial saving,
on many VCTs you benefit from annual rebates of up to
0.15% for the first three years.
Access to investments not normally available through
any other channels
From the BBC CBeebies number one preschool children’s
show Bing, to state-of-the-art veterinary A&E centre The
Ralph, to Aparito, a digital health company backed by
pharma giant Bayer AG – Wealth Club investors get access
to opportunities not normally available elsewhere, often on
preferential terms.
‘Knock your socks off’ service
We believe our job is to make it as easy as possible for
experienced investors to make their own decisions. If you
have any questions, all you have to do is pick up the phone
or email us. You will speak to someone who knows what
they’re talking about. Please note, we don’t provide advice
or personal recommendations.
About Alex Davies
FOUNDER AND CHIEF EXECUTIVE
WEALTH CLUB
Alex was a board director at FTSE 100 firm Hargreaves
Lansdown, where he worked for 15 years. He was
responsible for building Hargreaves Lansdown into
the UK’s largest direct-to-consumer SIPP provider with
more than 150,000 clients and over £12 billion under
management.
After leaving and selling some of his shares, Alex sought
tax-efficient ways to invest his money. To his surprise, he
found that good-quality services designed to help high
net worth and sophisticated investors with non-standard
and tax-efficient investments are thin on the ground.
This led to the idea of Wealth Club, now the UK’s largest
broker of tax-efficient investments.
Wealth Club won Best Investment Platform at the Growth
Investor Awards in 2018, 2019 and 2021. In 2022, the FT
named it one of Europe’s 1,000 fastest-growing companies.
Page 17
The media has quickly recognised Wealth Club and
regularly comes to us for comments on tax-efficient
investments. Wealth Club has been quoted in Forbes, the
Financial Times, the Times, The Telegraph, The Spectator
and MoneyWeek, to name but a few.
Wealth Club | Clubfinance Guide to IHT | April 2022
IHT042022
www.wealthclub.co.uk
enquiries@wealthclub.co.uk
0117 929 0511