Welcome to our latest newsletter. As before, we have put together a few articles that we hope you may find useful. We hope that you have enjoyed the summer and are looking forward to the run up to Christmas and year end. From all at Future Directions.

Article: Business Relief and Inheritance Tax

Business relief (previously known as business property relief (‘BPR’)) works by reducing the amount of Inheritance Tax, (IHT), payable on certain business assets by either 50% or 100% depending on the nature of the asset and how it is used.

Business relief was originally introduced to ensure that, following the death of a business owner, a family-owned business can survive as a trading entity without having to be sold or broken up to pay inheritance tax liability.

Over the years the scope of BR has been widened, making it an attractive option for individuals looking to invest in companies in order to remove a potential IHT burden. It has also been extended to include investments in certain types of unquoted companies (not listed on the main stock market) to encourage investment into this area.

For example, a 2013 decision allowed investors to hold BR-qualifying, AIM- listed shares in an ISA, making them even more tax efficient.

Once assets qualifying for Business Relief are held for two years, they are 100% relievable against IHT (providing they are still held at the time of death).

Investing in BR Qualifying shares can be an excellent way to reduce a potential Inheritance Tax liability, while maintaining access to the underlying investments if needed. This can be a good alternative to other Inheritance Tax mitigation options, such as trusts, which often limit access to capital.

There are a number of investment options available that are designed specifically to benefit from Business Relief. If you would like to see whether they would be relevant and appropriate for you, please get in touch.

It is important to seek expert advice on how you can ease the potential burden of IHT. Levels and bases of reliefs from taxation are subject to change. The Financial Conduct Authority does not regulate some forms of IHT planning.

The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.

Article: Mitigating CGT

When you sell an asset, the taxman is likely to take a look to see if you’ve made a profit. Often, this is not an issue; as anyone who has ever sold a car can attest, losing money is easy. However, with investments, the whole idea is to make a profit, and this profit is what interests the taxman.

Whenever you profit from the sale of a qualifying asset, you are considered to have made a 'capital gain'. This is calculated on the difference in value between the price at which you bought the asset (or its value at date of gift, if you were given it) and the price at which you sold it, minus any expenses incurred in the transactions. Nevertheless, relatively few people payCapital Gains Tax (CGT) in full because a bit of planning can minimise your liability.

First, you have some exemptions; for example, your main residence and anything with a limited lifespan, such as your car. Moreover, you have an annual allowance (£3,000 for 2024/25) below which any gains realised are tax-free. It may also be possible to stagger the sale of your assets so that you use this allow once every tax year or use a sale to help reset the base value of an asset against which future gains will be measured.

Finally, you can use your partner's allowances – as transfers between spouses are CGT-free – orIndividual Savings Accounts, which shelter investment gains from CGT completely.

Article: Junior ISAs

It’s never too early to start thinking about saving for the future. A Junior Individual SavingsAccount (‘JISA’) gives children the opportunity to start saving early – via cash, stocks and shares, or a combination of the two – within a tax-free wrapper. The maximum amount that may be paid into a JISA in the 2024/25 tax year is £9,000. This can be invested into a cash JISA or a stocks and shares JISA, or allocated between the two.

According to HMRC, £1.5 billion was subscribed to JISAs in 2022/23. Until around 9 years ago, children born between 1 September 2002 and 2January 2011 were previously only eligible for aChild Trust Fund (CTF). However, following changes introduced in April 2015, CTF savings can be transferred into a JISA instead.

In order to qualify for a JISA, the child has to live in the UK and be aged under 18. A child can hold either type of JISA or can mix and match between the two. JISAs may be switched from cash to stocks and shares, and back again. However, the child can only have one cash JISA and one stocks and shares JISA during their childhood, although those two components can be held with different providers. The JISA savings belong to the child, who can take control of the JISA once hey are 16 but – with a few very limited exceptions – cannot withdraw the money until they are 18.