Harrogate-based Tower Street Finance has secured a £15m funding line and is targeting inheritance delays with products that make it easier and quicker for people to access their inheritance.
Its Inheritance Tax (IHT) Loan helps the thousands of families each year who are denied access to their loved-one’s legacy because they can’t afford the tax bill; and its Inheritance Advance is a product for beneficiaries who want to access their inheritance more quickly than the 9 to 12 months it usually takes.
Both products, regulated by the Financial Conduct Authority, are unique in the Probate sector because there are no credit checks, personal liability, monthly payments or charges over assets, and are repaid from the Estate, not by the borrower.
Tower Street Finance managing director Andrew Bartle said: “We identified a gap in the market for products that help beneficiaries and executors facing inheritance and Probate delays, which have been exacerbated this year because of Coronavirus.
“Our Inheritance Advance provides beneficiaries with access to a proportion of their inheritance well before the lengthy legal process required to distribute the assets is completed.
“And we estimate around £2bn (1) a year is tied up in estates each year leaving thousands of families in a catch-22 situation. They can’t access their inheritance until the tax bill has been paid but they don’t have the money to pay it until they’ve received their inheritance.
“Our IHT Loan provides a risk-free way for these families to unlock these estates, without them taking any risk or personal liability.”
Property and assets can pass between married couples and those in a civil partnership without attracting a tax bill on the death of the first person.
But each year around 25,200 deaths result in an IHT bill that is charged at 40 per cent of the value of the estate that falls above the nil rate band, which is currently £325,000 for a single person. In the 2019/2020 tax year the average IHT bill was around £200,000.
Tower Street Finance offers two inheritance loan products, its award-winning (2) Inheritance Advance for beneficiaries and its IHT Loan, which is paid directly to HMRC to settle the tax bill, for executors.
Both products offer:
- No credit checks
- No charge over property
- No personal liability
- No monthly repayments
- Fixed monthly interest rate
The loan is always repaid from the estate funds once the estate is ready to distribute. There is a 2 per cent origination fee (capped at £1,500), which can be added to the loan, and a fixed yearly interest rate of 19.6 per cent. Interest roll up is capped at 30 months.
(1) 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.
If 8 per cent 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.
(2) Inheritance Advance won the Innovation of the Year Award at the British Wills & Probate Awards held in October 2020, hosted by Jennie Bond.