As inheritance tax receipts soar 14%, an estate planning service can help reduce your bill

Inheritance tax receipts hit a record high of £6.1bn in the 2021/22 tax year, up 14% on the year before. The number is expected to increase over the coming years due to rising house prices and because inheritance tax thresholds are frozen until 2026.

This is where the ProVen Estate Planning Service can help, as we specialise in investments that are likely to be exempt from IHT because the underlying companies qualify for business belief.

Below we explain more about how our service works and how you might reduce your IHT bill.

About estate planning services

An estate planning service, such as the ProVen Estate Planning Service (PEPS) is a discretionary investment platform. Through this platform, we invest in a range of unquoted companies that have the potential to deliver capital growth and consistent income that can be returned to shareholders through dividends.

Crucially, the investments are likely to qualify for business relief (also called business property relief), meaning they become free of inheritance tax after being held for two years.

At PEPS, we consistently provide annual returns of between 3% and 4% to our investors.

Our investment structure

When investing in PEPS, your funds will be spread across four trading companies spanning two core strategies – solar and lending, unless you choose to only invest in one strategy.

These are: Solar Growth, Solar Income & Growth, Secured Lending, and ProVen Legacy.

The two solar companies offer investors access to a portfolio of more than 2,500 residential and commercial rooftop solar systems and 9 large-scale solar power plants.

Our solar investments typically have long-term contracts in place for the sale of the electricity generated. These firms also own and operate their own plant and machinery, boosting their value and reducing risk to shareholders.

Secured Lending and ProVen Legacy make short and medium-term loans to a range of small and medium-sized UK businesses to boost portfolio diversification. We typically loan to companies that pledge collateral, such as fixed and current assets, to reduce risk.

Rising demand for estate planning

The Covid-19 pandemic caused many people to re-evaluate their lives. Some moved to different parts of the country to be closer to family, while others took on a new job or career.

Two years on from the peak of the pandemic, many of these lifestyle changes remain in place. And although the economic outlook is now looking more uncertain, house prices continue to grow. The average UK house price rose by 12.8% in the year to May, up from 11.9% in the year to April, according to the latest figures from the Office for National Statistics (ONS).

Rising house prices mean more and more people will be drawn into inheritance tax. Financial advisers say there has been a rise in clients seeking estate planning services as they consider the impact of inheritance tax.

The benefits of business relief

Business relief has been around for almost half a century. Introduced by the government in 1976, the initial aim was to help family businesses pass down the generations without incurring an inheritance tax (IHT) charge.

Since then it has expanded and is now also used by individuals who can invest in, or loan money to, these businesses to reduce their IHT bill.

To qualify for business relief, a company must meet the below criteria:

  • It must not be listed on a main stock exchange – although qualifying companies on the Alternative Investment Market (AIM) are allowed
  • The company must be ‘trading’ on a commercial basis with the aim of making a profit

Where business relief applies, an individual is exempt from paying inheritance tax on the value of the shares, as long as the investment has been held for a minimum of two years and is still held at the time of death.

All investments in PEPS are likely to qualify for business relief.

What next?

If you are considering an estate planning service or other opportunities to reduce your inheritance tax bill, you should consult with an independent financial adviser.

If you would like to find out more about the ProVen Estate Planning Service, please read our key information brochure. Alternatively, call us on 020 7845 7820 and we will be happy to help (please note that we cannot provide investment or tax advice).

The ProVen Estate Planning Service is part of Beringea, a long-standing venture capital firm that invests in companies in the UK and the US.

Investments accessed through the ProVen Estate Planning Service are made into private companies and are deemed to carry a higher risk than many other types of investment. As with all investments your capital is at risk and returns are not guaranteed. You should read the risks associated with the Service before deciding whether to invest (or in the case of a financial adviser, before deciding whether to recommend them to a client).