Because Isas were tax-free during life, but subject to IHT on death, many investors were realising their Isa investments to pass them into a flexible trust to avoid IHT after a further seven years.
Suddenly, there is the prospect of Aim Isas whereby existing Isa holdings can now be transferred into an Aim Isa, which – because of the IHT exemption on Aim shares – then becomes IHT-free after two years.
So it’s time we climbed out of those silos.
Paul Wilcox is chairman and technical director at Way Group
Tax-efficient investments: What are they?
EISs
Enterprise investment schemes were launched in 1994. Benefits include 30 per cent income tax relief and investments are inheritance tax (IHT)-exempt after two years.
VCTs
A venture capital trust is a form of investment trust that invests mainly in small companies with high potential for growth and need some financial support. Benefits include income tax relief of 30 per cent and the ability to receive tax-free income in the form of dividends.
Isas
Individual savings accounts allow a person to save up to £15,000 a year tax free in a cash Isa, a stocks and shares Isa or a combination of the two.
Trusts
These are vehicles generally used to mitigate IHT liabilities, as providing the settlor – person who puts assets in the trust – survives for seven years the assets fall outside their estate for IHT purposes. There are many different kinds of trust including discretionary trusts and interest in possession trusts.
