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Inheritance Tax Solutions

Inheritance Tax Solutions

Inheritance tax (“IHT”) is a tax levied in the UK on the value of the taxable estate of an individual in the event of their death. The rate of IHT is currently 40%. inheritance tax solutions

An individual’s taxable estate is the value of their taxable assets in excess of the “nil rate band.” Each individual has a nil rate band of £325,000 and can also make use of any unused nil rate band of a spouse who dies before them. This gives each married couple the ability to pass on up to £650,000 to their descendants without an IHT charge. From 6 April 2017, an additional nil rate band will be available to be set against the value of the family home – the additional nil rate band will be £100,000 per person during the tax year ended 5 April 2018, rising to £175,000 per person from 6 April 2020 onwards.

A common way for an individual to mitigate their family’s exposure to IHT is to give assets away to their children. However, in order for such a gift to be fully effective for IHT purposes, the donor must survive for seven years – and more importantly, the donor will actually have to give up control over the donated assets. An alternative strategy could be to invest in assets which are exempt from IHT, such as assets which qualify for Business Property Relief (“BPR”).

Qualifying for BPR

If an individual has held an asset which qualifies for BPR for at least 2 years at the time of death then the value of that asset is not included in the individual’s taxable estate for IHT purposes. Therefore the individual must survive for 2 years rather than 7 and does not have to give anything away.

BPR was introduced in 1976 to enable the owners of small trading businesses to pass their businesses to their successors without an IHT charge. Prior to the introduction of BPR, the businesses would quite often need to be sold by the successors simply to fund the IHT liability, and that was felt to be detrimental to the economy of the UK. The BPR rules have been broadened over time and BPR now applies to most business assets and shares in unquoted trading companies.

The Mariana Estate Planning solution is an investment product designed to utilise BPR whilst preserving investors’ capital. For more information please contact your financial adviser.

The information set out above is a general summary of the IHT and BPR legislation currently in force in the UK. It should not be relied upon as financial or tax advice. Before investing in any financial product appropriate professional advice should be sought.

 

RISK WARNING

The following pages refer to Mariana investment products. It is important that you read and understand the risk statements below before you proceed.

Mariana’s investment products may provide both individual and institutional investors with flexible and innovative investment solutions offering varying levels of risk, asset exposure, capital protection and tax exposure.

It is important, however, that you understand the risks attached to your investments. The key risk factors are summarised below, but please remember that these are general risks and the risks that are relevant to individual products are set out in the brochure for that product.

Mariana does not provide investment advice in relation to investment products and we strongly recommend that you discuss any proposed investment with your financial adviser before you invest.

Investment in a Mariana product should form part only of your investment portfolio. You should also maintain savings you can access at short notice in case of emergency to meet any short term cash needs that may arise during the term of your investment.

Investment Risk – This is the risk arising from the market(s) or asset(s) into which your investment is made or to which the performance of your investment is linked. Their value might decrease, which could cause you to lose money or, if they increase, the amount of the increase may be greater than the return you get from your investment in a Mariana product.

Counterparty Risk – This is the risk that the financial institution by whom your investment is backed gets into financial difficulties and does not, or cannot, pay the amounts due in relation to your investment. This could cause you to lose some or all of your money and any investment returns that would have otherwise been payable.

Term Risk – This is the risk that an investor’s circumstances could change, forcing the early encashment of an investment. Such early encashment will be subject to a fee and the amount repaid is likely to be less than the initial capital invested. An investor should be aware that they may not be able to access the value of their investment immediately.

Inflation Risk – This is the risk that inflation may reduce the real value of your investment over time.

Tax Risk – The values of any tax reliefs generated by your investment will depend on your individual circumstances. You should note that the levels and bases of taxation and reliefs available may change in the future and changes may be applied retrospectively.

ISA Transfer Risk – if you wish to transfer an existing ISA, it must be done in cash. This means that your existing ISA manager will sell your investment and you are likely to be charged an exit fee. There is then the possibility of a loss of income or growth if markets should rise while your transfer is being processed.

Cancellation Risk – This is the risk that if you decide to cancel the investment after it has been purchased you are likely to lose some of your money.

It is important that you read all the related Mariana product literature carefully and in full so that you understand how the product works and can decide whether or not you are prepared to accept the risks and the possible consequences of investing in a particular product, before proceeding with your investment.

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