AIM shares, ISAs and Inheritance Tax

AIM shares, ISAs and Inheritance Tax

Following recent changes in the taxation benefits of ISAs and Inheritance Tax, we wanted to expand on certain AIM shares which benefit from Business Property Relief or BPR and can now be held within an ISA account. Qualifying AIM shares benefit from BRP once they have been held by an investor for a minimum of two years, after this period they are exempt from inheritance tax. This mean for investors holding these shares in their ISA account for the two-year qualifying period should benefit from virtually no taxes while they hold the share, and no potential inheritance tax liability, which is currently charged at 40%.

Please remember the value of tax shelters will depend on individual circumstances, and tax rules can change over time.

Following the introduction of new ISA rules many investors are now looking to transfer their AIM shares into an ISA account, typically using a Bed & ISA service. The good news is that this doesn’t affect the qualifying period so, for example, if you transfer AIM shares you have already held for two years this inheritance tax benefit will be retained within the ISA, without them needing to be held for a further two years.

So which AIM stocks qualify?

There is no definitive list of which AIM stocks qualify for business property relief. This is largely because the qualification status of a company or businesses can change over time. The latest HMRC guidance is available at

Please bear in mind AIM stocks typically involve taking greater investment risk, make sure you understand all the consequences. We always recommend you seek professional advice. Your portfolio could fall in value and be worth less than your originally invested.

Inheritance Tax: main residence nil-rate band

Inheritance Tax: main residence nil-rate band

A quick recap thanks to HMRC…

Who is likely to be affected

Individuals with direct descendants who have an estate (including a main residence) with total assets above the Inheritance Tax (IHT) threshold (or nil-rate band) of £325,000 and personal representatives of deceased persons.

General description of the measure

This measure introduces an additional nil-rate band when a residence is passed on death to a direct descendant.

This will be:

  • £100,000 in 2017 to 2018
  • £125,000 in 2018 to 2019
  • £150,000 in 2019 to 2020
  • £175,000 in 2020 to 2021

It will then increase in line with Consumer Prices Index (CPI) from 2021 to 2022 onwards. Any unused nil-rate band will be able to be transferred to a surviving spouse or civil partner.

The additional nil-rate band will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil-rate band, are passed on death to direct descendants.

There will be a tapered withdrawal of the additional nil-rate band for estates with a net value of more than £2 million. This will be at a withdrawal rate of £1 for every £2 over this threshold.

The existing nil-rate band will remain at £325,000 from 2018 to 2019 until the end of 2020 to 2021.

HMRC Allowable Gifts for Inheritance Tax

HMRC Allowable Gifts for Inheritance Tax

There’s usually no Inheritance Tax to pay on small gifts you make out of your normal income, such as Christmas or birthday presents. These are known as ‘exempted gifts’.  There’s also no Inheritance Tax to pay on gifts between spouses or civil partners. You can give them as much as you like during your lifetime – as long as they live in the UK permanently. Other gifts count towards the value of your estate. There may be Inheritance Tax to pay if you’ve given away more than £325,000, but only if you die within 7 years.

What counts as a gift

A gift can be:

  • Anything that has a value, such as money, property, possessions
  • A loss in value when something’s transferred, for example if you sell your house to your child for less than it is worth, the difference in value counts as a gift.

Exempted gifts

You can give away £3,000 worth of gifts each tax year (6 April to 5 April) without them being added to the value of your estate. This is known as your ‘annual exemption’. You can carry any unused annual exemption forward to the next year – but only for one year.

Each tax year, you can also give away:

  • wedding or civil ceremony gifts of up to £1,000 per person (£2,500 for a grandchild or great grandchild, £5,000 for a child)
  • normal gifts out of your income, for example Christmas or birthday presents – you must still be able to maintain your standard of living after making the gift
  • payments to help with another person’s living costs, such as an elderly relative or a child under 18
  • gifts to charities and political parties

Small gifts up to £250

You can give as many gifts of up to £250 per person as you want during the tax year as long as you haven’t used another exemption on the same person.

The 7 year rule

If there’s Inheritance Tax to pay, it’s charged at 40% on gifts given in the 3 years before you die.

Gifts made 3 to 7 years before your death are taxed on a sliding scale known as ‘taper relief’.


Remember – Gifts are not counted towards the value of your estate after 7 years.

Please note this article is for information purposes only.

Money Purchase Annual Allowance (MPAA)

Money Purchase Annual Allowance (MPAA)

What is the annual allowance?

The annual allowance is a limit to the total contributions that can be paid into defined contribution pension schemes and the total amount of benefits that you can build up in defined benefit pension scheme each year, for tax relief purposes.

The annual allowance is currently capped at £40,000 although a lower limit of £10,000 may apply if you have already started drawing your pension. The annual allowance applies across all of the schemes you belong to, it’s not a ‘per scheme’ limit and includes all of the contributions that you or your employer pay or anyone else who pays on your behalf.

When does MPAA apply?

HMRC introduced the MPAA to ensure that there are no potential recycling issues with individuals claiming further tax relief on any new contributions made having just taken their pension benefits under the new flexibility rules.

It is only when pension benefits have been flexibly accessed that the MPAA of £10,000 will apply. This includes various different options (known as trigger events) such as:

  • Taking an uncrystallised funds pension lump sum (UFPLS).
  • Taking income above the maximum GAD limit from an existing capped drawdown arrangement.
  • Being in flexible drawdown at any time before 6 April 2015 as a member (not a dependant). [Whether they have taken income or the flexible drawdown policy still existed at 6 April 2015 is irrelevant].
  • Going into flexi-access drawdown from an existing capped drawdown arrangement or with uncrystallised funds and then subsequently taking income.
  • Taking a stand-alone lump sum for an individual who has primary protection with associated registered tax-free cash.

What is the proposed change from 6 April 2017?

The government announced in its Autumn Statement on 23rd November 2016 that it’s proposing to reduce the MPAA from £10,000 to £4,000 with effect from 6 April 2017. A 12 week consultation, seeking views on the possible impact of this reduction, is running until 15th February 2017. Chancellor Philip Hammond said the decision is in order “to prevent inappropriate double tax relief”.

The money purchase annual allowance will only start to apply from the day after you have taken flexible benefits and so any previous savings are not affected.

Please note this article is for information purposes only.

Trustee Responsibilities, Trust Law & Adding Value Breakfast

Trustee Responsibilities, Trust Law & Adding Value Breakfast

St Davids Hotel, Ewloe 15th February 2017 8:30am till 11am

This short breakfast seminar aims to provide an insightful recap on a Trustees Responsibilities, what modern trust law looks like, how to make the right investment decisions and how you can add value to your practice by looking at new ways of engaging with trust clients.

To help us answer all of these questions we have a panel of experts. The panel is made up of:

Nick Middlehurst – Managing Director of Heritage Financial Solutions Ltd, an established IFA specialising in trust investments in the North West.

John Willis – Portfolio Manager for Quilters Cheviot with a history dating back to 1771, Quilters have a wealth of experiencing managing trust assets.

Kathy Russell – Trust expert at Canada Life, a large life assurance provider with history of providing world class trusts.

A reminder from the ICAEW regarding Trustee Responsibilities:

Members are reminded of the fundamental principle of professional competence and due care 4. A continuing duty exists to maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional service based on current developments in practice, legislation and techniques. There is also a duty to act diligently and in accordance with applicable technical and professional standards when providing professional services.

Book Here EventBrite

The Autumn Budget 2016 – The Highlights

The Autumn Budget 2016 – The Highlights

The Chancellor says the government wants to ensure the UK economy is “match-fit” for the transition that will follow the Brexit vote. “So we will maintain our commitment to fiscal discipline”, he says, “while recognising the need for investment to drive productivity”

Economic Growth

Philip Hammond says the Office for Budget Responsibility forecasts economic growth of:

  • 1% in 2016 – down from 2% it forecast before the EU referendum
  • 4% in 2017 – down from 2.2%
  • 7% in 2018 – down from 2.1%
  • 1% in 2019 – down from 2.1%
  • 0% in 2020 – down from 2.1%

“While the OBR is clear that it cannot predict the deal the UK will strike with the EU, its current view is that the referendum decision means that potential growth over the forecast period is 2.4% lower than would otherwise have been the case,” the Chancellor says.

National Debt

Philip Hammond says the deficit – as measured by public sector net borrowing as a percentage of GDP – will fall from 4% last year to 3.5% this year.  It is forecast to continue to fall over the next five years, reaching 0.7% in 2021-22.

“This will be the lowest deficit as a share of GDP in two decades,” he tells MPs.

Philip Hammond accepts that debt will rise until 2018/19, when it is expected to fall for the first time since 2002 – and it will continue to fall thereafter.

Innovation and infrastructure gets £23bn

The Chancellor says the UK needs to become more productive, so that wages can rise and people can enjoy higher living standards. To help with that, he announces a National Productivity Investment Fund of £23bn to be spent on innovation and infrastructure over the next five years.

Philip Hammond pledges more than £1bn for broadband and 5G – a move trailed earlier this week. “My ambition is for the UK to be a world leader in 5G. That means a full-fibre network; a step-change in speed, security and reliability,” he says.

The government will also offer business rates relief on new fibre infrastructure from April, Mr Hammond adds.

Funding for 40,000 new homes

The Chancellor confirms funding for 40,000 new homes and announces a large-scale pilot to give the right to buy to housing association tenants.

“We will focus government infrastructure investment to unlock land for housing with a new £2.3bn Housing Infrastructure Fund to deliver infrastructure for up to 100,000 new homes in areas of high demand.


“And, to provide affordable housing that supports a wide range of need, we will invest a further £1.4bn to deliver 40,000 additional affordable homes. And I will also relax restrictions on government grant to allow providers to deliver a wider range of housing types,” Mr Hammond says.

“I can also announce a large-scale regional pilot of Right to Buy for Housing Association tenants – and continued support for homeownership through the Help to Buy: Equity Loan scheme and the Help to Buy ISA.”


  • First tax rise – Insurance premium tax to increase from 17% to 20% from June 2017.
  • Small businesses in rural areas a tax break worth up to £2,900 per year by increasing the Rural Rate Relief.
  • Pensions – where someone is already in drawdown the annual allowance will be reduced from £10,000 per annum to £4,000 per annum.
  • Philip Hammond confirms the government will still raise the personal allowance to £12,500, and the threshold for the higher tax rate to £50,000, by the end of this Parliament.
  • The National Living Wage will increase from £7.20 to £7.50 in April next year.
  • Cancel fuel duty rise – average saving of £130 per year, per driver.

Letting Agents

Letting Agents in England to be banned from imposing upfront fees on tenants.

Autumn statement to be abolished.

Please note this article is for information purposes only.

President-Elect Trump – Market Special

President-Elect Trump – Market Special

President-Elect Trump – Market Special

‘Do you ever get the feeling that the only reason we have elections is to find out if the polls were right?’ – Robert Orben

Political watching from a European time zone in 2016 has all been about the hour from 2am to 3am (London time).  In late June consensus expectations of a Brexit referendum ‘remain’ vote were quashed as ‘leave’ surprisingly triumphed.  It was around a similar time on Wednesday morning that the seemingly iron-clad grip Hillary Clinton had on the Presidential vote started to slip away much to widespread astonishment here in Europe.

Prior to the last year or two President-elect Donald Trump was famous for a couple of matters in Europe: his role in the American version of The Apprentice and his interest in Scottish golf course development.  Today he is a couple of months or so away from taking the most powerful political office in the world.

Most European politicians would have preferred Hillary Clinton to have prevailed in the Presidential vote.  Donald Trump strikes many as instinctively protectionist and potentially dismissive of historical international allegiances.  This matters for Europe because the wealth created in the region in the post Second World War period has occurred via a partnership with the United States on progressive trade liberalisation and defence co-operation (most notably during the Cold War).  Europe does not have the internal resources to be overly protectionist nor the geographic structure to consider isolation.  In short a continuation of the normal world order would have suited Europe very well – especially as Brexit and Eurozone angst is providing considerable internal challenges at the moment.

Comments so far reflect much of the above such as ‘German businesses signal concern over protectionism’, concerns from high ranking French officials about recent deals on climate controls and Iran plus the spectre of the Russian leader Vladimir Putin – who is feared in Europe after his intervention in Ukraine a couple of years ago – calling for a ‘constructive dialogue’ on US-Russia relations.

I believe it is likely that trade actions and negotiations will characterise whether the Trump Presidency is viewed as a relative economic success or not.  Campaign rhetoric is one matter, practical reality is another and despite the short-term attractions of more protectionist actions the strong view from Europe is that they should be resisted.  We will have to see in the fullness of time whether this is the reality or not but I was heartened by the tone of Donald Trump’s effective acceptance speech from his campaign headquarters where he not only noted that it was ‘time for us to come together as one united people’ but he also hoped to forge ‘great, great relationships’ with other nations.

The key to succeed in this difficult balancing act between campaign rhetoric and practical realities may well be the relationship with the UK a country which is going through its own challenges with the aftermath of the Brexit referendum vote.  First it was noteworthy that the UK Prime Minister Theresa May observed in her comments that:

‘Britain and the United States have an enduring and special relationship based on the values of freedom, democracy and enterprise…I look forward to working with president-elect Donald Trump, building on these ties to ensure the security and prosperity of our nations in the years ahead’

The UK not only is looking to strike trade deals with countries – a concept warmly supported by Donald Trump on the campaign trail in stark contrast to President Obama’s ‘back of the queue’ comment – but as a link to European political and diplomatic scene there is scope to develop a mutual beneficial bilateral relationship.  Back in the 1980s and 1990s this was referred to as a ‘special relationship’ by successive British Prime Ministers – an era of stronger growth and trade/diplomatic successes.

Alternative scenarios exist – of creeping trade controls, an enthused anti-establishment political order in France and Germany plotting electoral success in 2017 and creaking international co-operations.  However the initial solid capital markets reaction – certainly much more benign than on the day of the Brexit referendum result – shows that unexpected news is not always negatively interpreted.

This week’s political news does not change the notion that for the investment markets the glass can still be half full and keeping your money invested but watching themes and trends carefully makes the most sense.  Policy-makers just have to keep on working to convince the electorate that they are efficiently on the economic case too.

Written by Chris Bailey – Member of the Heritage Investment Committee.

Please note this article is for information purposes only.

Shareholder Protection Insurance Cover

Shareholder Protection Insurance Cover

What happens if an owner or part-owner of a company dies unexpectedly?

Regardless of the industry you operate in, it’s critical to ensure that you protect your business with a safety net. After all, it represents not only the livelihood of you and your family, but also that of your employees and fellow shareholders.

The event of a business owner dying unexpectedly can have a serious detrimental effects on their enterprise, not to mention the lives of their family. When it comes to distributing shares, family members and other beneficiaries may prefer to cash them in. Meanwhile other shareholders may wish to purchase the shares but may not have adequate funds at their disposal. This is where shareholder protection insurance comes in extremely useful.

The benefits of shareholder protection insurance:

  • A safe and stable business plan
  • Support for family members
  • It covers serious illnesses

Key Person Insurance

The death of a key employee in a business can have a devastating financial impact. You can provide your business with a safety net against the death, terminal or critical illness of a key employee with key person protection.

  • What is Key Person Protection?

Put simply, Key Person Protection (also known as key man insurance) is a business insuring itself against the financial loss it would suffer if a key person in their business died or were diagnosed with a specified critical illness.

  • How does Key Person Protection Work?

Key Person Protection is a life assurance or life assurance and critical illness cover policy taken out to cover the life of a key person within your business. The policy is owned and paid for by the employer, so any pay-out is payable to the employer.

  • Why do I need Key Person Protection?

The business could suffer badly, with sales and profits falling and increased workloads for the remaining staff. The reason this coverage is so important in a small company is because the death of a key person could also lead to the immediate death of the company itself.

What is Equity Release and how does it work

What is Equity Release and how does it work

Equity Release what is it?

Equity release refers to a range of products that let you access the equity (cash) tied up in your home if you are over the age of 55. You can take the money you release as a lump sum or, in several smaller amounts or as a combination of both. The “catch” is that the income-provider must be repaid at a later stage, usually when you die. Thus equity release is particularly useful for elderly persons who do not intend or are not able to leave a large estate for their heirs when they die.

There are typically two equity release options:

Lifetime Mortgage

You take out a mortgage secured on your property provided it is your main residence, while retaining ownership. You can choose to ring-fence some of the value of your property as an inheritance for your family. You can choose to make repayments or let the interest roll-up. The loan amount and any accrued interest is paid back when you die or when you move into long-term care.

  • If you’ve taken out an interest roll-up plan, there will be less for you to pass onto your family as an inheritance.
  • Debt can grow quickly if the interest is rolled up.
  • You will have to pay arrangement fees, which can reach approx. £1,500-£3,000 in total.
  • If you decide you want to downsize later on you may not have enough equity in your home to do this.
  • The money you receive from equity release may affect your entitlement to state benefits

Home Reversion Plans

You sell part or all of your home to a home reversion provider in return for a lump sum or regular payments. You have the right to continue living in the property until you die, rent free, but you have to agree to maintain and insure it. You can ring-fence a percentage of your property for later use, possibly for inheritance. The percentage you retain will always remain the same regardless of the change in property values.

  • You will have to pay arrangement fees, which can reach approx. £1,500-£3,000 in total.
  • If you release equity from your home, you may not be able to rely on your property for money you need later in your retirement. For instance, if you need to pay for long-term care.
  • If you decide you want to downsize later on you may not have enough equity in your home to do this.
  • The money you receive from equity release may affect your entitlement to state benefits
  • These schemes can be complicated and expensive to unravel if you change your mind.
  • Home reversion plans will usually not give you anything near to the true market value of your home when compared to selling your property on the open market

Always seek independent financial advice and legal advice before committing to an equity release scheme. There are many risks in both lifetime mortgages and home reversion plans. This article is for information purposes only and should not be considered as advice.

The benefits of reviewing your Pension

The benefits of reviewing your Pension

Is your pension performing the best it possibly can for you?

Do you remember the last time you checked on how your pension is performing? Failing to carry out regular reviews on your pension performance could mean you’re missing out. You may even discover that your pension scheme is no longer able to provide you with that comfortable retirement that you were looking forward to.

If you are currently paying into a personal pension scheme or have contributed to either a personal pension or even a money purchase scheme offered by a previous employer in the past, a pension review can be immensely beneficial. One of the factors to investigate when undertaking a pension review are the charges involved. The charges incorporated on some of the “older style” plans are much higher than their modern equivalents, so having a review will reveal what effect these charges are having on your total pension value.

Many people pay into pensions for years, sometimes their whole lives and have no idea how hard their money is working for them. Some clients aren’t even sure what type products they have holdings in and what element of risk is associated to them.

Pension Reviews

Here at Heritage we provide an objective assessment of your pension products and advise you exactly where you stand and how your pension is actually performing. If we find that your current plan is performing well and meeting your current requirements and expectations, it may well be a case of staying as you are. However, if we feel it would be financially beneficial to you by transferring your pension to another scheme, we’ll make a recommendation for a more suitable product and clearly explain the benefits and expected outcomes in order to help you make a more informed decision.