Inheritance Tax Solutions - 2-Year Exemption with Capital Gains Tax deferral and Income Tax relief (With Growth Potential)
How can I protect my assets from IHT but still have access to my capital and also reduce my Capital Gains and Income Tax liability?
- Mrs Stopher is a widow, 64, with an estate value exceeding the IHT free amount by £300,000
- She inherited 100% of her late husband’s estate
- Mrs Stopher is about to retire and her pensions will provide the income she needs
- She has just sold her investment property portfolio for £300,000 with a capital gain of £160,000
- Mrs Stopher is a higher rate tax payer in the current tax year with an Income Tax liability of £30,000 per annum
- She does not want to lose access to or gift any capital to her family at this time
- If she does nothing her Inheritance Tax bill (about 13% of assets) will be £120,000 Plus Capital Gains Tax bill will be £41,692 Plus Income Tax liability of £30,000 per annum.
- Mrs Stopher to invest £200,000 into appropriate Enterprise Investment Scheme (EIS) this tax year
- Mrs Stopher to invest £100,000 into appropriate EIS in the next tax year
- EIS to be held for 3 years to maximise tax benefits
Benefits from advice given:
- After 2 years, Mrs Stopher’s investment is removed from her estate
- Mrs Stopher can withdraw money without affecting IHT relief on remaining amount invested (although CGT and Income Tax relief will be lost on monies withdrawn within 3 years)
- Mrs Stopher continues to hold the investment herself, so retains access and control
- Mrs Stopher can defer her CGT liability
- Mrs Stopher qualifies for Income Tax relief on 30% of the investment
- Mrs Stopher can reinvest after 3 years into another EIS to continue CGT deferral and gain further Income Tax relief
- The total IHT saving after 2 years £120,000
Plus immediate CGT Saving £41,692
Income Tax saving previous tax year £30,000
Income Tax saving current tax year £30,000
Income Tax saving next tax year £30,000
Total Savings £251,692
Please note: Only the amount of tax paid can be reclaimed.
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This example is for illustrative purposes only, based on current legislation and tax allowances. Tax rules and regulations are subject to change.