"It’s a catch-22 for thousands of families each year, they can’t access their legacy until the tax bill has been paid but they don’t have the money to pay it until they’ve received their inheritance."
According to HMRC, 25,200 estates incurred an inheritance tax charge in 2019/20 with total IHT receipts of £5.2bn (an average bill of around £200,000). That means the average value of the estate on which tax was charged (the amount above the nil rate band plus allowances) was around £500,000.
All estates usually qualify for the £325,000 nil rate band, and a proportion qualify for the married couple’s transferable allowance of £325,000 and the Residence Nil Rate Band of £175,000 meaning the average allowance is circa. £500,000. Therefore the average gross estate value is around £1,000,000.
Tower Street's research found that if 8% of those estates could not afford the inheritance tax bill that would mean around 2,000 were locked and beneficiaries could not access the assets. The value of those locked estates would be around £2bn and the IHT payable on locked estates would be around £400m.
Regulated by the FCA, the Tower Street Finance IHT loan is paid directly to the Inland Revenue, allowing families to start the legal process and receive their inheritance.
The loan can be applied for by the executor of the Will, or the person applying to be personal representative where there is no Will.
It offers no credit checks, no charge over property, no personal liability, no monthly repayments, and a fixed monthly interest rate.
The loan is repaid from the estate funds once the Grant of Probate has been issued. There is a 2% origination fee (capped at £1,500), which can be added to the loan, and a yearly interest rate of 19.6%. Interest roll up is capped at 30 months.
Tower Street Finance works with IFAs and pays an introductory fee once the loan has completed. The IHT Loan is the second product from Tower Street Finance. It also offers an Inheritance Advance, a product for beneficiaries who want to access their inheritance more quickly than the 9 to 12 months it usually takes.
Andrew Bartle, managing director of Tower Street Finance, said: “Our IHT Loan provides a lifeline for people who are facing a huge tax bill when a loved one dies.
“It’s a catch-22 for thousands of families each year, they can’t access their legacy until the tax bill has been paid but they don’t have the money to pay it until they’ve received their inheritance.
“We’ve worked closely with IFAs to create the IHT Loan as our research among 2,000 UK adults shows that over a quarter (26%) would turn to their financial adviser for advice on dealing with IHT.
“Our IHT Loan, which has no monthly repayments and no credit checks, is a risk-free way for these families to access the £2bn a year we estimate is tied up in ‘locked estates’ as well as accelerating the receipt of £400m in tax receipts for the Government.”
