Overview

This case study explores:

• How Mr. Andrews sought to reduce a £580,000 Inheritance Tax (IHT) Bill

• The options considered for his estate planning

• How the final recommendation saved £504,000 in IHT 

​

Background

Mr. Andrews, a 74-year-old retired businessman, wanted to ensure his family inherited as much of his wealth as possible. His estate included a £1 million home and £1.45 million in investments. While his assets had grown significantly, he was concerned about IHT and capital gains tax (CGT) implications.

The Challenge

Despite previous planning his family faced an IHT bill of £580,000.

His main concerns were:

• Ensuring financial security in retirement.

• Passing on as much wealth as possible.

• Retaining ownership of his home.

The Solution

Three options were explored:

• Whole of Life Insurance – Premiums were too high due to his age.

• Gifting Assets – Would take seven years to be fully exempt from IHT.

• Investing in Business Relief (BR) Qualifying Investments – The chosen approach.

​

What is Business Relief (BR)?

Business Relief (BR) is a government-backed incentive designed to encourage investment in UK businesses. It allows individuals to invest in qualifying companies, and after two years, the value of these investments becomes exempt from Inheritance Tax (IHT). The first £1 million invested benefits from 100% relief, meaning it is fully outside your estate for IHT purposes. Any amount above £1 million receives 50% relief, further reducing your taxable estate.

​

BR isn’t just for business owners—anyone can invest in BR-qualifying assets to help reduce their IHT liability while still having access to their funds. However, it’s important to note that your capital is at risk.

Mr. Andrews sold £1,450,000 in investments and paid £68,800 capital gains tax. He then reinvested:

• £1,380,000 in a business relief investment with a four-week liquidity period.

​

The first million of the invest will be fully outside the estate after 2 years and final £380,000 will be 50% outside the estate, this means the tax liability has gone from £1,450,000 to just £190,000

​

The Outcome

If Mr. Andrews survives for two years, his family will benefit from:

• £504,000 saved in Inheritance Tax (Note: he paid £68,000 in capital gains tax)

• Retained full ownership of his home, ensuring financial security.

• Maintained access to his BR investment, offering flexibility.

​

Conclusion

By using Business Relief, Mr. Andrews significantly reduced his IHT burden while maintaining financial flexibility—ensuring more of his wealth stays with his family. If you're looking to protect your estate from unnecessary tax, let’s book a call to explore how I can help you do the same.