An ISA is one of the most tax efficient vehicles possible for the purposes of income and growth. However, ISAs are not free of all tax.

ISAs lose their tax efficient status on death, meaning beneficiaries no longer benefit from tax free income and growth. ISAs are also included within your chargeable estate on death and are therefore still subject to Inheritance Tax like most other investments (with a couple of exceptions).

In 2013 the UK government changed legislation to allow Alternative Investment Market (AIM) listed companies into ISAs, which enabled individuals to do inheritance tax planning within the ISA tax wrapper for the first time.

Many companies listed on AIM can qualify for Business Property Relief (BPR) which is a statutory tax relief originally introduced to allow family businesses to be passed down through generations free of inheritance tax.

If your ISA is invested in BPR-qualifying AIM stocks you should be able to pass on your ISA free of IHT, provided you hold the shares for at least two years and still hold them on your death. There’s no limit on the amount you can transfer.

Richard Higgs has recorded a video explaining in simple terms how these ISAs can reduce the inheritance tax bill your loved ones may be left with. Click here to watch.

If you would like a book a complimentary financial review where we can talk you through inheritance tax and your options, please give us a call on 0117 3636 212 or email office@haroldstephens.co.uk