Terminology explained

Nil Rate Band (NRB)

The Nil Rate Band is the threshold up to which no IHT is charged on an individual's estate, set at £325,000 for 2024/25. Estates valued up to this amount are taxed at 0% IHT, while the excess is taxed at 40%.

Case study

Additional Permitted Subscriptions (APS) for ISAs

Downing AIM ISA

Key points

• The service invests in a concentrated portfolio of 20-45 AIM-listed companies that qualify for Business Relief (BR).
• Inheritance Tax (IHT) relief should be available after two years, so long as the shares are held at death.
• In addition to the IHT benefits, the service aims to generate capital growth from the underlying holdings, although this isn't guaranteed.
• We have arranged an insurance policy covering the first 20% of any net loss on investments, on death up to the age of 90 - at no extra cost and with no medical questionnaires or exclusions for pre-existing conditions.
• The Wealth Guard is available for a minimum of two years from the date shares are purchased, at which point IHT relief should be available.
• Please see the terms and conditions for full details or our insurance policies.

Take a look at the below example

Robert passes away, leaving a stocks and shares ISA portfolio worth £500,000 to his wife, Marie.

Marie’s Nil Rate Band is fully utilised elsewhere. Under the Additional Permitted Subscription (APS), Robert’s accumulated ISA can be inherited by Marie in the form of an increased ISA allowance for her, without affecting her annual ISA allowance.

However, Marie is concerned about IHT and wants to make provisions so her two children are not subject to a 40% IHT bill if she were to pass away.

Marie speaks to her adviser, who discusses three scenarios with her and the potential IHT impact:

1. taking no action;

2. making an APS transfer to another stocks and shares ISA;

3. making an APS transfer to the Downing AIM ISA.

Her adviser also highlights the additional risks associated with AIM shares.

‍

‍

Please note, these examples are set out for illustrative purposes only and no growth or fees have been assumed.

Please note, shares in the Downing AIM ISA must be held for at least two years and at death to qualify for IHT relief. AIM shares are generally considered to be higher risk than shares listed on the London Stock Exchange. Capital is at risk.

------

‍

Opinions expressed represent the views of the author at the time of publication, are subject to change, and should not be interpreted as investment or tax advice.

Important notice: This article is for investment professionals only. This article is for information only and does not form part of a direct offer or invitation to purchase, subscribe for or dispose of securities and no reliance should be placed on it. No reliance should be made on this content to inform any investment of tax planning decision.

This content contains information that is believed to be accurate at the time of publication but is subject to change without notice. The explanation of all of the tax rules set out have been written in accordance with our understanding of the law and interpretation of it at the time of publication.

Whilst care has been taken in compiling this content, no representation or warranty, express or implied, is made by Downing LLP as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.