Aim-listed Isas have a role in IHT planning: lawyer

The head of City-based law firm Speechly Bircham’s specialist probate team said with so many legislative changes recently, it was important to work out which steps should be taken to reduce IHT exposure.

He said: “It is vital that financial advisers are brought up to speed about the ways in which they can do more to help their clients.”

His comments came during a roundtable, hosted by fund manager Octopus Investments, on the changing face of estate planning.

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During the roundtable, advisers and industry specialists discussed how various government initiatives, such as allowing Isas to invest in Aim, which carries certain IHT advantages, may help in the overall context of estate planning.

Mark Williams, business line manager for Octopus, said it was important to encourage advisers to debate questions about how IHT solutions “can fit within wider estate planning strategies.”

The roundtable session also focused on how to incorporate protection and trusts into the wealth management process, and the role of risk in estate planning.

Last September, Octopus launched an Aim IHT Isa, which allows investors to benefit from the tax-effective nature of Isas, as well as from business property relief applicable to Aim-listed stocks, which will give the Isa holder an IHT exemption after two years.

Peter Hargreaves, founder and executive director of Bristol-based Hargreaves Lansdown, said: “The Isa is, and has been for many years, the most convenient tax shelter available in the UK.

“It is simply a wrapper within which you can hold almost any investment, but with no tax to pay on income or capital gains. Less tax means higher returns.

Capital gains (in excess of the £10,900 annual allowance)18%28%28%0%*
Dividend income (i.e from shares)10%32.5%37.5%10%*
Interest income (i.e. from corporate bonds and other fixed interest investments)20%40%45%0%

*All UK dividends are paid with a notional 10% tax credit deducted, which cannot be reclaimed within an Isa. CGT is more complicated if you are a basic rate tax payer and the gain, when added to your taxable income, takes you into the higher rate tax bracket. (Source: Hargreaves Lansdown)