Our 5-minute read – Tax Tips – for UK doctors and dentists will help you save tax, get organised with your tax affairs and make sure you meet important deadlines with ease.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice.
Business Property Relief (BPR) is not a well know method of tax relief, but it’s one that can give you more control over your money, and can make it easier to move money out of your estate for the purposes of saving on tax.
The connection between nil rate band and inheritance tax
For the tax year 2019/20 the nil rate band (NRB) currently sits at £325,000. This means that when you die, your estate has no inheritance tax to pay on the value up to £325,000.
However, if the value of your estate exceeds that amount, then your family will more than likely need to pay inheritance tax of 40% on the remaining estate on everything over the NRB threshold once you pass away.
The tax saving method of Business Property Relief
BPR is a form of tax relief by way of investing your money in trading businesses.
Your shares in a BPR qualifying business can be left as part of your estate, to your family, free from inheritance tax in the event of your death. The main clause of Business Property Relief is that you need to have owned the shares for at least 2 years before you die.
The risks to consider before choosing Business Property Relief
The lure of Business Property Relief is the control you have of your own money. A financial adviser can help you choose the businesses to invest your money in, and you can rest assured that you have a fund in place to pass along to your beneficiaries after your death.
It’s not all plain sailing, as with anything there are a few risks you need to be aware of:
- Shares need to be bought in a BPR qualifying business that must not be listed on a main stock exchange.
- There is a risk that the investment may fall and you could get back less than you put in.
- Tax rules could change in the future and the value of tax relief will depend on your personal circumstances. There is no guarantee that current BPR qualifying businesses will remain qualifying in the future.
- You need to have owned the shares for at least 2 years before you die for your estate to be inheritance tax-free.
- Any capital withdrawals taken from your investment may no longer qualify for Business Property Relief, and will lose their inheritance tax exemption.
Tax planning for the future
Not everyone likes to take chances with their investments, so it’s important that you speak to a financial adviser to explore all the options available to you before you take any action when estate planning. This way you can be clear on the finer details of Business Property Relief and how it can benefit both you and your estate.
At Dental and Medical Financial Services, we’re dedicated to helping you to make full use of your tax allowances to reduce your tax bill, so don’t hesitate to contact us – we can give you advice on all your financial planning needs.