A growing number of families face paying inheritance tax, thanks to rising property prices and because the threshold at which you start paying inheritance tax is frozen until at least 2028.

Inheritance tax (IHT) is voluntary. This doesn’t mean you can avoid paying the tax where it’s due, but there are ways to reduce the liability.

This is where ProVen’s Estate Planning Service can help, and below we explain who might benefit from the service and who might want to consider inheritance tax mitigation.

About an estate planning service

A service such as the ProVen Estate Planning Service (PEPS) invests in private businesses that are not listed on the stock market. These services make use of Business Relief (BR) to provide relief from inheritance tax on investors’ holdings after just two years.

The typical structure of an estate planning service is a discretionary portfolio or platform. A client will transfer their money to the service, and the money will then be redistributed to invest in private companies across a range of investment strategies.

Services will differ in their investment focus. At PEPS, we focus on two core strategies, both of which are focusing exclusively on investing in the UK:

- Solar

- Lending to SMEs

As well as offering the potential for mitigating inheritance tax, an investment in PEPS offers predictable returns as we target capital preservation rather than purely focusing on high growth.

You can read more here about what makes the ProVen Estate Planning Service stand out from its competitors.

The benefits of an estate planning service

Our clients are looking to mitigate or reduce inheritance tax liability on death through effective lifetime planning.

They are particularly keen to maximise the benefits of business relief. Investments that qualify for business relief may be 100 per cent free of inheritance tax after just two years. This compares to gifting money or assets during a person’s lifetime, which only becomes free of inheritance tax after seven years.  

The full benefits of an estate planning service are listed here.

Who might use an estate planning service?

Traditionally, clients of estate planning services are typically aged in their 70s and upwards, or they may sadly be in ill health. This is because they are looking for part of their estate to fall outside of inheritance tax in the shortest possible time frame – perhaps because they have only got round to estate planning in later life.  

But we are noticing an increasing number of younger clients investing in PEPS – mostly because they are cautious of giving away too many assets in their lifetime. It is difficult to predict how long a person will live and how much they may need in later life, particularly if they need care.

By investing in a service such as PEPS, people keep control of their money. They can withdraw the money if needed, transfer it to another investment or receive income in the form of dividends. The money is theirs if needed during their lifetime, but the aim is for it to be free from inheritance tax after death.

“These clients are too young to give their assets away. They may want to retain access and control, while benefiting from the fact that inheritance tax relief kicks in after just two years. There is no complex trust that needs to be set up, there is no medical underwriting and there is also the potential for investment growth,” says Anne O'Loughlin, sales manager at Beringea, which manages PEPS.

She adds: “Put simply: if the client needs the money, they can have it. And if the client doesn't, it can go to the beneficiaries. When we speak to financial advisers, it is the potential to access the money that is the top reason for clients to invest in business relief products in this way.”

So should I consider an estate planning service?

It is never too early to consider inheritance tax planning and at PEPS we are certainly noticing the age of clients coming down.

Inheritance tax receipts have been rising over the past 20 years and are set to hit £7.8bn by 2028 – a 28 per cent rise from the £6.1bn raised in 2021/22. This is because of rising property prices and the frozen nil rate band (the threshold at which inheritance tax applies), which will stay at £325,000 until 2028.

Using a business relief solution - accessed through an estate planning service - means that clients aren't giving anything away. Investing in a service such as PEPS is also much less complex than some of the other solutions out there, such as setting up a trust to pass on money or assets. You can ensure you are passing on as much as you can to your loved ones and beneficiaries, while remaining in control of your money.

Estate planning services are not for everyone. They are generally higher risk and require a longer investment term. You may get back less than you invest. It is therefore important that you understand the key risks:

You may lose money: the value of your investments may go down as well as up and investors may not get back the full amount invested. Investing in smaller companies generally carries higher risk than those listed on a main stock exchange.

Tax reliefs can not be guaranteed: tax treatment depends on individual circumstances and tax rules could change in the future.

No guarantee of liquidity: shares in unquoted companies may be harder to sell and therefore there is no guarantee that withdrawals can be paid when requested.

The contents of this article should not be construed as investment, tax, financial or legal advice. We recommend that you seek advice from a regulated Financial Adviser.  

Prospective investors should only subscribe for shares on the basis of information contained in the full information memorandum.

ProVen has been one of the UK’s leading providers of tax-efficient investment products for the past 20 years. We manage more than £300m on behalf of over 10,000 retail investors through VCTs and our estate planning service. Find out more about the ProVen Estate Planning Service here.

This article is for UK residents interested in finding out more about Business Relief and the ProVen Estate Planning Service strategies. UK tax rules and regulations are subject to change, and such changes may be retrospective. Your ability to obtain tax reliefs will depend on your personal circumstances. It is not our intention to offer legal, tax or investment advice, and we always recommend that investors seek professional advice that can take account of their personal circumstances before making any investment or estate planning decisions. An investment in the ProVen Estate Planning Service should be considered high risk and past performance is not a good indicator of future results.

Important notice: issued by Beringea LLP of Charter House, 55 Drury Lane, London, England WC2B 5SQ, registered in England & Wales number OC342919 and authorised and regulated by the Financial Conduct Authority, number 496358.

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