At this time of year, it’s clear that Individual Savings Accounts (ISAs) remain a permanent feature in the UK’s tax-free savings landscape but how tax efficient do they remain for clients of a certain age?   


It might to be time start a conversation with these clients about their accumulated wealth, what their intentions are for it and how they could be leaving their children a 40% Inheritance Tax (IHT) bill. Originally IHT was supposed to affect the very wealthy however, this is no longer the case. The latest figures from HM Revenue and Customs show that IHT receipts for April 2022 to January 2023 were at record levels at an incredible £5.9billion, and with frozen IHT thresholds, IHT receipts are forecast to continue to rise. 

A large source of funds that come into the WAY Trusts are from ISA portfolios owned by people over the age of 60, who have benefitted from tax efficient savings all their working life but have reached an age where IHT is becoming an increasing concern. They may have reservations about making outright lifetime gifts but there are many benefits of a Flexible Reversionary Trust, like those offered by WAY Trustees Limited, that overcome these concerns. At the discretion of their appointed Trustees, clients can retain access to annual reversions of capital (and growth) should their circumstances change, as well as the Trustees being able to loan or appoint money to the Beneficiaries at any time, whilst also mitigating IHT.  

Many ISA savers hold significant equity-based investments within their portfolios but have no provision to transfer these portfolios into alternative options to protect their savings from a 40% IHT liability. Clients’ ought to be aware of all taxes their estate might face and revisit their objectives for saving with their Adviser. Common themes might be to provide for retirement, to cover future care costs and to provide support for future generations, all of which can be met, more IHT-efficiently, with a Flexible Reversionary Trust.  

Another benefit of holding assets in trust is that assets in trust are not subject to probate as the Settlor does not own the assets, the Trustees do. This is unlike ISA portfolios which certainly are subject to probate and IHT. Families need to consider what bills might need to be paid during the time taken to obtain probate, which is typically six to nine months, but can last years. If peace of mind is being sought by assuming the ISA can be used to pay those bills, those families may need to think again.  

Some families are taking Estate Planning very seriously and are utilising Flexible Reversionary Trusts, like those offered from WAY Trustees Limited to protect their hard-earned wealth for future generations – without a 40% IHT liability – provided the Settlor survives the inter-vivos period, assets Assets held in trust do not form part of the estate for IHT purposes.  

And all this is just the tip of the iceberg! For those Advisers who would like to protect and preserve the wealth of their clients, intergenerationally, WAY Trustees Limited has expert estate planning specialists across the UK, so call us today and let’s discuss how we can help.