A drop of wine could protect your portfolio from IHT

By Contributing editor Emily Hohler Jan 16, 2006

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The government is doing nicely out of inheritance tax (IHT), says Paula Hawkins in The Times: Revenue & Customs raked in nearly £3bn in 2004-5, up 16% on the previous year. In the search for ways to mitigate this liability, IHT portfolios are becoming popular. These are offered by stockbrokers and private client fund managers and invest in shares on Aim.

Although companies are quoted on Aim, they are confusingly classified as ‘unquoted’ shares, and as such, many qualify for business property tax relief (BPR). “This means that if you die and have a portfolio of these shares – and have held them for at least two years – then the value of that holding falls outside your estate for IHT purposes,” says Martin Sherwood, head of tax-efficient solutions at Smith & Williamson (S&W).

Stockbrokers argue that many Aim investments are little riskier than small to medium-sized firms listed on the main stock exchange. Aim has grown hugely over the past two years, and now includes household names such as Majestic Wine and firms with market caps of around £800m. IHT portfolios are ideally suited to those with estates well over the £270k IHT threshold: S&W require a minimum £50,000 investment.

Published in Personal finance | More articles by Emily Hohler

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