Protecting your wealth for you and future generations; MARKET COMMENTARY.
Andy Cumming Regional Head of Advice, Close Brothers Asset Management, Edinburgh Tel: 0131 656 3018 Email: firstname.lastname@example.org The tax year end is a window of opportunity to make use of exemptions and allowances. One of the most commonly known, and used, is the Individual Savings Account (ISA) allowance. Due to the tax advantages on income and investment gains you are restricted to investing up to a maximum of PS11,520 in this tax year.
ISAs have proven to be very popular since their launch in April 1999. This is principally due to their ease of access and tax efficiency which is a combination that appeals to everyone. One drawback is that ISAs cannot be written in trust, thereby ensuring that an ISA will form part of your estate for Inheritance Tax (IHT) purposes if held till date of death. IHT is payable at 40% on all assets over PS325,000 which could negate these generous tax advantages, if the ISA monies are unutilised. Until now!
Since 5 August 2013 it has been possible to hold shares in companies listed on the Alternative Investment Market (AIM) directly in an ISA.
More than 1,000 companies trading on AIM qualify for Business Property Relief, meaning investors qualify for full relief from IHT once these qualifying shares have been held for two years, as long as they remain invested at the date of death. With the prospect of seeing Stamp Duty on AIM shares abolished at the start of the next tax year, the tax advantages of investing on AIM could be four-fold: no Stamp Duty, no Capital Gains Tax (CGT), no additional tax on dividend income (any investment dividends are received with a 10 per cent dividend tax credit which cannot be reclaimed) and subject to certain criteria, no IHT.
That means it could save your beneficiaries from a 40% tax bill on the qualifying ISA investments they inherit.
Investment in AIM shares is not for the faint hearted as these shares are notoriously volatile and their value can fall suddenly and substantially. We would recommend professional advice is sought in every case to ensure suitability. With offices in Edinburgh and Glasgow, Close Brothers Asset Management provides financial planning and advice to clients across Scotland. By providing tax efficient solutions, we can help minimise your tax obligations to any changing circumstances. Your tax treatment will depend on your own circumstances and is subject to change which could reduce any benefits gained in the future.
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