Future proofing your family is just as important as your business. Find out how with business property relief.

Business Asset Planning: A Guide To Inheritance Tax Free Business Assets

By Alex
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In 1976, a tax relief called business property relief (BPR) was introduced. The main aim was to allow family-owned businesses to continue to trade without needing to be broken up or sold off to settle the inheritance tax due on the value of the business.

 

In essence, limited company shares in a company that has been trading for over two years and is not listed on the stock exchange can be left inheritance tax-free upon death.

 

This saved many jobs and meant good employers and businesses could survive for generations.

 

Since 1976, the number of limited companies has increased dramatically, and many one-man bands are also utilising the limited company structure. However, the relief is still in place and can be tax-efficient for company owners.

 

BPR has since been shortened to BR for business relief, but the tax treatment is the same. Business relief is great if you own a limited company, as your shares can be left to your family tax-free. Here, we look at business asset planning and how inheritance tax free assets can benefit you and your family in the future.

 

The Inheritance Tax Trap

In many cases, a spouse might inherit the shares and then choose to sell them. The proceeds will then be sent to the spouse and instantly form part of their estate as the proceeds are no longer tax-inheritance-free.

 

This is where a business relief trust will be essential to preserve the funds’ inheritance tax-free status.

Settling Inheritance Tax Insurance

There is a way to settle the inheritance tax on your estate without the need to use business relief or even give away assets while you’re alive, and that is with a whole life insurance policy.

 

This unique life insurance lasts your entire life and is guaranteed to pay out if you continue to pay the premiums.

 

The policy’s funds will be paid into a trust upon death, so the estate has instant access to them, even though the probate in the broader estate may not have been concluded.

 

The estate can then use the funds to pay the inheritance tax due, and the assets can be released from probate.

 

How will your business assets be treated?

Our estate team can offer you a free review to assess the status of your company shares and determine how much if any, inheritance tax exposure your estate has. We can then provide some solutions to reduce or remove this entirely. It’s a free, no-obligation call, and we are happy to answer questions free of charge – contact us today