BR Guide FINAL 20 Feb

47 CASE STUDIES Estate without IHT planning AIM IHT ISA AIM IHT ISA (3% growth (net) not reinvested) AIM IHT ISA (3% growth (net) reinvested) AIM IHT ISA (3% growth (net) reinvested with additional £6,000 invested at start of each year GROSS INVESTMENT VALUE £120,000 £120,000 £120,000 £120,000 £120,000 1% INITIAL FEE £1,200 £1,200 £1,200 £1,200 £1,200 NET INVESTMENT IN AIM IHT ISA £118,800 £118,800 £118,800 £118,800 £118,800 INHERITANCE TAX AT 40% £47,520 £0 £0 £0 £0 GROWTH IN VALUE ON GROSS INVESTMENT - £47,520 - £1,200 £16,620 £17,722 £50,532 VALUE OF INHERITANCE LEFT TO BENEFICIARIES £72,480 £118,800 (Even if the value of the AIM IHT ISA doesn’t go up, his beneficiaries still save £46,320 after all fees*, without the 40% IHT liability) £135,420 £136,522 £169,332 *IN THIS EXAMPLE, THE CHOSEN AIM IHT ISA MANAGER ONLY CHARGES 1% INITIAL FEE, WITHOUT ANY DEALING FEES, ONGOING FEES OR EXIT CHARGES. THESE FIGURES WILL VARY DEPENDING ON WHAT FEES ARE APPLIED BY THE RELEVANT AIM IHT MANAGER. RESULTS AFTER FIVE YEARS AIM ISA CONTRIBUTIONS OVER A NUMBER OF YEARS TO BUILD A TAX EFFICIENT POT SCENARIO: James, retired and in his 70s, has accumulated a £120,000 ISA portfolio including stocks and shares, which he has over 20 years of experience of investing in. He would now like to find a way to invest that retains the tax benefits of an ISA wrapper, without the potential IHT liabilities. This leads to 100% IHT relief and also offers access to the growth potential of carefully-selected UK smaller companies, and access to his funds when he wants them. THE MANAGER OF THE SERVICE INVESTS THE FUNDS INTO SUITABLE AIM BR SHARES AIM BR BR Qualifying An optional two-year term insurance policy would give added protection by paying out the equivalent of any IHT due should he die before the two-year BR qualification period expires. There are none of the costs of putting assets into trust or buying a life assurance policy. Any non-AIM/non-BR qualifying AIM shares are sold and, because this is done within the ISA wrapper, any gains made on the shares are not subject to CGT. AIM IHT ISA JAMES TRANSFERS HIS EXISTING ISA TO AN AIM IHT ISA WITH THE OBJECTIVE OF IHT MITIGATION, FREE OF TAX BR qualifying AIM shares that have been held for at least two years at the date of death of the ISA holder, wrapped in an ISA, remain within HMRC’s sights for CGT and income tax. CASE STUDY 5