Inheritance Tax Benefits Of Property Investment Companies

A correctly set up property investment company really can save you income tax, and qualify for full tax relief on mortgage interest and Inheritance Tax. In this blog post, we're going to look at Inheritance Tax ...

All landlords want to reduce the taxable value of their estate when Business Property Relief is unavailable. By using a property investment company, you could mitigate the Inheritance Tax liability attached to your shares.

"It also allows you to pass only part of the company's current value to the next generation!"

If you want to keep the dividend flow going, you could consider using so-called 'freezer' shares. This freezes the value of the shares belonging to you so future growth accrues to their beneficiary.

This can be achieved by altering the Articles of Association and dividing the company's shares into two classes of A and B shares. A shares carry an entitlement to dividends. Note that when incorporating the property investment company, your current value remains equivalent to the nominal value of your A shares.

All future growth accrues B shares that will be given to your children, or to a trust that benefits them in future. This means there should not be any Inheritance Tax implications. B shares have no voting or dividend rights and no capital value above their face value.

"This is because there has been no significant transfer of value!"

All cases are individual so a property investment company may or may not be right for you, but it is always a great idea to take professional tax advice to fully understand the benefits of one.

You never know, it could be a very affordable tax planning option.

If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.