Muslim Money Talk
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Every week we'll be sitting down with Founders, leaders and industry experts from across multiple disciplines to discuss lessons learned, mistakes made and most importantly 'How they did it?'.
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Muslim Money Talk
How The 40% Inheritance Tax Is Destroying Muslim Families (And How to Manage It) | MMT EP 60 - Ruzwan Boota
This episode of Muslim Money Talk dives into the dangers of poor succession planning, inheritance disputes, and the looming inheritance tax crisis for Muslim families and business owners in the UK. Guest expert Ruzwan Boota shares real-life case studies, explains Sharia-compliant wills, and highlights urgent steps families must take to protect wealth, avoid riba, and preserve unity.
This podcast is hosted by Areeb Siddiqui, the founder and CEO of Kestrl, the app that helps people to grow their wealth without compromise
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Show Notes:
00:00 - Opening
02:42 – Introduction of guest Roswan Bhuta, his background in tax advisory
04:16 – Stories from advising footballers on wealth protection
05:56 – Transition to iWills and focus on Muslim tax advisory
07:34 – Muslim wealth, poverty stats, and proactive tax planning
09:05 – Case study: business owner who delayed planning and left chaos
13:04 – Family disputes, Sharia vs. non-Sharia inheritance splits
16:49 – Sharia-compliant wills: rules, shares, and misconceptions20:33 – Examples of siblings inheriting in absence of sons
21:29 – Using trusts to protect irresponsible heirs
22:24 – Process for drafting wills quickly and affordably
25:53 – Kestrel fintech interlude (ad segment)
26:14 – Inheritance tax thresholds, reliefs, and new 2026 law
31:43 – Financial burden on families and rise of riba loans
32:52 – Urgent planning window before April 2026
34:17 – Shaitan’s influence in family disputes over wealth
34:53 – Implications for startups and co-founders
37:24 – Passing on debt and the dangers of delaying Sharia compliance
39:32 – Client story: widow deciding to clear riba mortgages
43:17 – Fees, transparency, and honest tax advice
45:49 – Step-by-step approach: wills, trusts, and family conversations
48:22 – Trust structures to protect immature beneficiaries
49:53 – Importance of proactive planning, not waiting for death
50:24 – Muslims and generational wealth building
51:16 – Practical takeaway: seek specialist tax advice, take action now
This is an absolute bombshell for families. Absolute bombshell. It's going to change everything. It's crazy. This is terrifying you know, we're seeing farmers go out on the streets marching, protesting. I have no idea why business owners aren't Honestly.
Speaker 3:They don't know. I guess they don't know. They don't know, they haven't realised.
Speaker 1:yet If you want to leave behind a massive dispute for your family and tear them apart, just don't have a will this is a nightmare.
Speaker 3:Yeah, like what?
Speaker 1:even worse than that people are going to have to start getting to rip out as well. Remember it's 40 40 people don't realize just how big the tax charge is. Inheritance tax is 40. What you realize as you go on is that it's not about how you earn money, because that's the easy part. It's more about how you protect your wealth and that is the difficult thing for everyone.
Speaker 3:What are the biggest problems you see muslims making when it comes to succession planning?
Speaker 1:and wealth in general. There's so many and the thing is is that I could start to list them, but probably the best way to explain is probably through a few examples. Yeah, please like.
Speaker 3:For example how should you be doing a will as a muslim?
Speaker 1:sharia compliant wills. Everyone's like woman. Can you have a sharia compliant will you know? Is that even legit in the uk? Of course it's legit. You can bequeath your assets to a dog if you wanted to is this expensive to do?
Speaker 3:no, no, no, no no.
Speaker 1:So the prophet said don't let two nights pass without having a will in place, two nights exactly. Is it your wealth or is it Allah's wealth? Who does this wealth belong to, and are you going to follow what Allah's wealth is legislated, or are you going to make up your own rules? But you shouldn't have to wait until someone's passed away to do this. This should be done proactively during lifetime.
Speaker 3:Before we begin, we notice only about 20% of you are subscribed to the podcast. So if you like what you're listening to and you want to hear more from us, then please consider subscribing, liking, sharing or leaving us a comment or a review wherever you are listening to this, because it really does help people to find us. Thank you, and back to the show. Thank you and back families for centuries and what you can do to protect yourself not just from the taxman, but also from Shaddan. So, as always, I'm your host, areeb Siddiqui and this is.
Speaker 3:Muslim Money Talk Rezawan. Welcome to the show. As-salamu alaykum, areeb j. Jazakumullahu khair for having me on the show. Wa-salamu alaykum, it's Fina. Yeah, we've talked about a lot of things so far, but this is one of the biggest matters when it comes to Muslims and money, and I feel like every family has some story about how there's some inheritance disputes back home which is just destroying them in some way. So I thought it'd be fantastic to bring you on to talk about some of your real world experiences, real case studies, what people are doing and how you're helping them to to get around that. Um, so yeah, and basically, welcome to the show thank you very much.
Speaker 1:Yeah, it's a topic that, alhamdulillah, I've been working in tax advisory now for 16 years and I see it all the time, unfortunately, something that everyone's like, yeah, it will get sorted, it will get sorted, it'll get sorted. And then suddenly issues prop up, be it family disputes, tax bills from HMRC and families just completing it and torn apart because of it.
Speaker 3:So really, yeah, trying to make sure the community is aware of this and really starting to take guard against it, starting to take action fantastic just being proactive, really, before we get into all of that and those case studies, can you tell me a bit about yourself, like how did you come into tax? Were you always at iwells? What were you doing before?
Speaker 1:yeah, sure, so I started tax advisory 16 years ago. Uh, started off at a tax boutique firm actually, where I graduated from an accountancy and finance from Birmingham University and after that started work at a tax boutique in Birmingham where actually we were dealing with a lot of England football stars. Really.
Speaker 1:So, yeah, some of the biggest footballers in the UK, in the world, actually well-recognized names, and Alhamdulillah, I was part of the teams that were advising them. How are footballers with their finances? Uh, yes, it's. It's very interesting. You know what, when people think about financial literacy, people think it's about how you earn money, knowing how to earn money. What you realize as you go on is that it's not about how you earn money, because that's the easy part yeah it's more about how you protect your wealth, and that is the difficult thing for everyone footballers, protecting wealth, I think.
Speaker 1:Just last night, uh, an article came out on bbc about how much footballers have lost and how taxman is coming after them because of negligent advice. So yeah, you can imagine, as soon as anyone gets wealth, everyone's trying to sell something to them oh yeah, you know what?
Speaker 1:can you help me out with this? Can you help me out with that? I've got a great investment here. Do you want to be part of it? And they just get missold. So many different things, wow, and it's not. They want to help people many of them but they end up getting abused.
Speaker 1:A lot of them, unfortunately, but yeah, the ones that we dealt with are. There's 101 stories I can share about them, but they're. It was really, really interesting working on their cases and, um, it's particularly you kind of obviously see what was going on in terms of the finance, which is always quite cool, but then we got bought out by a top 10 global accountancy firm called smith, and williamson was there then for a few years and after that joined mazars again top 10 global accountancy.
Speaker 1:Mazzaz is huge yeah, absolutely huge and joined the Birmingham office and, alhamdulillah, was there for 10 years, up until 2022. No, sorry, 2023.
Speaker 3:2023. So that's when a few things were happening. One was we were doing a funding round which Wahid was leading, yes, and at the same time, wahid purchased his solicitor's firm called I wills, yes, um, and I will specialized in, uh, inheritance planning and will creation um, for the muslim community primarily. And then they hired yourself as, basically, director to lead that exactly so.
Speaker 1:It was part of the deal. When they were acquiring iWills, they said look, roswan, come and join us. Right, build a tax advisory business. I've been working with iWills and Wahid for a very long time before that. Oh really, my focus, even at Mazar's yes, top 10 global accountancy firm, my passion area was always helping Muslims with tax. So when I joined in 2013, I said I really wanted to focus on helping the, the community. I had to call it. Obviously, you're not going to say I want to help just the Muslim community or set up a Muslim advisory practice within that size firm, so we called it the Asian advisory business. Could you not? Could you not say that? It's just one of those things? It's like you know the eyebrows.
Speaker 1:Okay why just Muslims? And then we just opened it up to say Asian Right eyebrows okay, why just muslims? And then we just opened it up to say asian right, just to.
Speaker 1:Really I knew that I was focusing on muslims because that was my passion area, but for the the optics, we called it asian business advisory just because people could then be oh yeah, I know a lot of asian people that are wealthy, whereas if you ask them, how many muslims do you know that are wealthy, they're like, oh okay, I'm not sure never thought about that and it's a big thing.
Speaker 3:There's that famous survey that came out, which islamic relief and muslim census did, showing that 50 of muslims in this country are living in poverty, are living below the poverty line.
Speaker 1:But you're saying there are still muslim families who have amassed great wealth through family businesses huge absolutely huge and the thing is at that time my passion is here, yes, yes, I wanted to help Muslims because I could see what was already there in terms of significant families that were already amassing lots of wealth. But I could see where it was going. You could see that Muslims doing well in their careers, doing well in business, and they were just continuing to grow. And you knew that they're just still going to the local accountant, and accountants don't provide tax advice. They might say, oh yeah, maybe do a little bit of this at the end of the year. There's something to do with tax, but that's not tax advice. Tax advice is proactive looking to the future, seeing what are your objectives commercially, personally and then helping you work towards those.
Speaker 1:Okay so it's very holistic. It's very holistic's very holistic.
Speaker 1:It's completely different from what an accountant would do yeah and I could see that's what was needed in the community and that's what I focused on. So when I joined zero muslim clients and before I left, 90 to 95 percent of my clients were muslims. Wow, and again because of that relationship I had with iwills and wahid, when they said we want you to join and build a tax advisory business, for us it was, it was a no-brainer. You jumped at the chance 100% incredible for me to focus on just continuing to help the Muslim community. Um, yeah, it's a huge opportunity. Alhamdulillah, we've been very, very busy since so let's get into it, man.
Speaker 3:What? What are the biggest problems you see Muslims making when it comes to succession planning and wealth in general?
Speaker 1:oh, there's so many, there's so many, and the thing is is that I could start to list them, but probably the best way to explain is probably through a few examples. Yeah, please, because, like, for example, I remember a client, um a number of years ago, uh approached me at an event. He said look, I've heard that you've done some really good work for my family, for other family members. I've got some affairs that I need looking at. Can you come and support me? So I went out to see him, went through the details. Now just a bit of background about the client, mashallah. You know he was around, say, 55 to 60 years old, amazing person, mashallah, lots of time for him, well known within the community. He had built up a very successful business, mashallah, and because of that success, built up a very significant property portfolio. Okay, fit, healthy, mashallah, for a 55 to 60 year old, had a full head of hair which, uh, brought up a lot of jealousy for me to be fair but no, he's, mashallah, fit and healthy.
Speaker 1:And we talked through his affairs and it was very clear straight away he had a big inheritance tax problem because of how he had structured everything. And I went through the details and I said, look, this needs to be dealt with as soon as possible because if you don't nip it in the bud now, this is only going to get worse.
Speaker 1:And he had structured all of his property portfolio within the same trading business that he had. So, within the same entity, that same limited company, he had the trading business and he just kept on acquiring loads and loads and loads of property within that business and he just kept on acquiring loads and loads and loads of property within that business. As a result, he was potentially losing inheritance tax relief on the full value of the business. Normally the trading business is protected for inheritance tax purposes. It gets qualified for 100% relief. But because he had tainted the company.
Speaker 1:With so much property he was potentially losing it all Really. So let's use an example. Obviously these aren't the numbers for this case, but let's say that the trading business was worth 4 million and the investment property was all worth around, say, 6 million. Because now the business is wholly or mainly an investment business because of all the property it outweighs the trading business, you've lost all the inheritance tax relief on the trading business. Normally that four million pound business you could pass on to the next generation tax free. Now the full four million was going to be exposed to inheritance tax charge at 40 percent.
Speaker 1:Remember it's 40 percent. 40 percent. People don't realize just how big the tax charge is inheritance Inheritance tax is 40% and recognising that would have wiped out the entire trading business.
Speaker 3:It would have caused big problems.
Speaker 1:So you now think on £10 million overall business, the whole company with the properties, £4 million was going to HMRC. That's the same value as the trading business in that example.
Speaker 3:So what they should have done is set up a separate trading company just for the properties well, another separate company.
Speaker 1:But again, there was a few other things that we were going to look at to try and do. There's a few nuances based on his scenario and we had put forward a proposal, said, look, this is going to save you significant tax, but you need to do it now because of a few things. He had to action it as soon as possible, otherwise potentially wasn't going to work for him. Going forward and, after presenting everything, helping explain it all to him, he understood everything he was like better.
Speaker 1:You know what, let's delay it. I've got a few things coming up with the business, you know. Just delay a bit and then we'll pick it up. That delay of oh yeah, just give us a few weeks a month to just ended up just dragging and dragging and dragging. And every time I would see him I was like uncle, come on, we really need to deal with this, don't delay it anymore. And he was like, yeah, better, we'll get it done. We'll get it done. A few years had passed and then all of a sudden, unfortunately, he passed away.
Speaker 3:I was worried.
Speaker 1:you were going to say that it was a shock enough to find out that he had passed away, but he had not done any planning. He left behind a grieving wife, grieving children, a very significant estate, a very significant inheritance tax bill and no will. No will at all. No will as a result. Now imagine you're trying to deal with the grief of losing your father. You now need to pick up the reins and understand where is everything. To pick up the reins and understand where is everything not only where is everything, but what was the intention in terms of this asset split? What did father want? Who's going to get what? And shaitan just absolutely run amok on them, unfortunately did he have?
Speaker 3:how many kids did he have?
Speaker 1:uh, a number of children, three children and unfortunately, infighting ensued. I want this, I want that. No, dad said this. Dad said that I want a sharia compliance split. No, I don't think we need a sharia compliance split because obviously, clearly, someone was going to get more if it wasn't a Sharia compliance split. And what's crazy is that it has been so many years now and it still hasn't been resolved. The estate still hasn't been administered. The penalties and interest is racking up on the inheritance tax bill. It's already significant. Add on top of that penalties and interest now and the family are completely divided.
Speaker 3:But why not just pay the inheritance tax now, because that's gone anyway?
Speaker 1:Exactly but who gets what and where is it going to get paid from? From whose share will it get paid from? Right, you know what? There were so many questions and so much dispute still ongoing between them. There's so many lessons from this one case, so many lessons that we can take One lesson from me Now. Look, arif, I'm sure you've been in this situation before. In all honesty, every single person has been in this situation before where we were presented with a scenario where we could have nipped something in the bud, but we decided to delay, and then it just got bigger and bigger, and bigger and bigger. And then then, later on, in hindsight, we look back and we think man I should have just dealt with it, man.
Speaker 1:Now the costs are higher, there are more problems, it's more difficult, the conversation x y, z, so many uh things now, um, and that price for the inaction when it comes that, that price is that you lose your family. You're completely torn apart. That's far too high of a price. Far too high of a price. But yet in our community we're seeing it all the time.
Speaker 3:You said something interesting, which was some people wanted the will, or the assets, to be distributed in a Sharia-compliant manner and other people did not. Can you go into that? Because I think there's a lot of confusion around the Sharia creation of a will and who gets what in that, because I think a lot of daughters complain that the sons are due more and therefore you can overwrite it by just creating your own will and that's okay. What's the truth behind it? How should you be doing a will as a muslim?
Speaker 1:sharia compliant wills everyone can. You have a sharia compliant will, you know? Is that even legit in the uk? Of course it's legit. You can bequeath your assets to a dog if you wanted to, so, yet you can't decide that you want it in a sharia compliant split. Of course you can. There's no problems with that whatsoever.
Speaker 1:Now, my colleagues are the experts when it comes to sharia compliant wills. Haroon rashid uh heads up bible solicitors. He's the one that created the first sharia compliant will in the uk 20 years ago. Really, yeah, he's the foremost expert in the uk, mashallah, when it comes to this, and he can give you a lot more examples of the details. But in this scenario, I would say that it all comes down to who are your inheritors on death, and no one knows who are going to be the inheritors on death, because we don't know when they're going to pass away. For example, I would say in my situation right now alhamdulillah, my parents are still alive, so it means that they will be one of my inheritors. Um, then I've got my wife, I've got my son and of course, they all get their relevant share. But you also have an opportunity to bequeath wealth to people other than your inheritors up to a third of your estate.
Speaker 1:So, you can give to charity etc.
Speaker 3:So your inheritors have a certain right on you your children, your parents, your spouse but then, beyond that, there's a certain element you can bequeath to whoever.
Speaker 1:So the Prophet said don't let two nights pass without having a will in place if you've got assets to bequeath. Two nights Exactly. But remember that the word that the Prophet used was wasiyah. Now, the wasiyah is essentially the third of your estate that you can bequeath to whoever you want.
Speaker 1:The other two thirds are already dictated by Allah subhanahu wa ta'ala so you can, up to a third, decide who you want that to to be passed to. So you know whether it's charity and you know someone other than the inheritors you know next, or another family member that isn't going to inherit. There's so many other people that, could you say?
Speaker 3:okay, so a third is third. Yeah, up to a third exactly. Could I just say look, I want my wife to get extra and just bequeath the extra third to her you can't do that.
Speaker 1:No, you can't, you can't. It's up to whatever the fraction that's already been decided.
Speaker 3:Okay, so that's the thing. So I know you're not the yourself, but okay, say you pass away. You have a wife and you have a son and a daughter. It's dictated how much the wife should receive, the son should receive, the daughter should receive. If someone decides I'm not going to do a sharia compliant, well, I'm just going to do. Everyone's going to get an equal split. Is that a sin?
Speaker 1:are you allowed to do that? I'm not going to get into all of that because that's far beyond my pay grade. I'm not qualified to talk about sharia compliance.
Speaker 1:But what I would say is that Allah SWT has already legislated who it should go to. It's not your matter. Now. You can't decide who is. Is it your wealth or is it Allahah swan talas? Who does this wealth belong to, and are you going to um follow what allah swan talas legislated, or you're going to make up your own rules? Yeah, that's the thing exactly now. One thing I should say and this is something that a lot of people forget is that that let's say that you only have daughters. So let's say you're married, you've got a wife, you've got two daughters, you've got your siblings as well. What people don't realize is that one of the inheritors will actually be your siblings in that scenario, oh, really yes, because it's two daughters.
Speaker 1:So there's no, exactly son, therefore the siblings, exactly, wow. So people don't realize this, and this is again just talking it through. Understanding, okay, what's the situation here? How can we you know, you know what, understanding whose rights are going to be there and then discussing it?
Speaker 3:I feel like no one, especially like back home. In pakistan, india, in all these places people are just doing whatever they want they just pass it to the sun.
Speaker 1:Oh yeah, the sun will deal with it the sun will deal with it.
Speaker 1:No, that's not how it is. That's not how it is at all that everyone has their right and that right should be provided to them and, yes, of course, giving it to them in the an appropriate manner. Um, obviously you wouldn't if the person was had a bad habit. Let's say, you know they're involved in the involved in the wrong things and they were due an inheritance. There's things that can be done to protect it for them, but not put it directly into their hand okay, so like creating a trust, exactly, and things like that there's so many things that can be done.
Speaker 1:People again just don't realize this. You need to get harun on in all honesty, to talk you through the details, because he can give you all the the details on it.
Speaker 1:But what would say in this scenario? That, again, people, everyone remembers their rights when they do something on death, and particularly they remember their rights if it means that they're going to get more than they would have otherwise. So that's where people really need to understand that. Look, guys, if you, if you want to leave behind a massive dispute for your family and tear them apart, just don't have a will simple, as if that's your family and tear them apart. Just don't have a will Simple as if that's your objective to tear your family apart. The easiest way to do it is not have a will. If you want to keep them together, get a will in place, seriously. The barakah that will come from it, you'll see it. And, of course, a Sharia compliant will as well. No doubt about it. Every Muslim should have one.
Speaker 3:How can people go about doing that?
Speaker 1:oh, it's very, very easy. Just contact uh the team and they'll get it in place with you from uh. What they do is just fill out a short questionnaire, just certain details. We have a quick call with them to talk it all through, understand what their scenario is in terms of what they want to achieve, what their objectives are the family dynamics, and then we get the will in place and within 10 working days we'll have a draft will to you.
Speaker 1:Well, so it's very, very quick to turn around. And, honestly, I remember doing mine during covid because I was like if there's ever a time that I'm going to be even more cognizant about death, it's when everything that was going on in covid people we were seeing it all the time everything was about death, death, death, death, death. And so I was like, okay, contacted a room and was like, come on, let's just get it in place. And honestly, the feeling, the weight off my shoulders when I got that will done was, honestly, I can't describe it, the clarity it gave me that you know what I've done my bit and I know now that what the plan is, should anything happen to me what needs to be done, and he would look after my son if I was to pass away, After both me and my wife were to pass away, for example he would look after my son, if that was to ever happen.
Speaker 3:So do you put that in the will as well? Like who would be the guardian of your child Exactly below the age? Like who would, who would be the guardian of your exactly below the age?
Speaker 1:of 18 who would be the guardian of our area. But that is where, yes, it's a difficult decision to make, but this is part of remember that this wealth is an amanah to us. Everything is an amanah. Our children are an amanah to us. So we've got to fulfill the amanah, fulfill that responsibility fully. If you're like, oh yeah, it will just be dealt with, it'll just be dealt with, that's not fulfilling your amanah. You've got to stand guard and be like, okay, what needs to be done here? Dart, the eyes cross the t's yarab, I've done my part.
Speaker 3:I've done what you've asked for me and if you help with setting up the wheels, do you also do the other bits like okay, create a trust for a child or, yeah, all the inheritance tax planning we can deal with as part of that.
Speaker 1:Even if you do have a will and you haven't dealt with the inheritance because a lot of people have wills in place but they haven't done any inheritance tax planning, we can do that as well. So even if you have a will you don't need it updated we'll look at the inheritance tax planning for you only if you want to. We can do both, or you just want a will. We'll just look at the will for you.
Speaker 3:Hey, assalamu alaikum. Before we continue, I really wanted to share a little bit about what Kestrel is and what we're doing. Kestrel is a fintech on a mission to help over a billion people to grow their wealth without compromising on their beliefs, and we're doing that by launching our very own digital bank later this year here in the UK. So if you'd like to sign up and become one of our first 1,000 customers who'll get free access to all of our services for life, please sign up through the link wherever you're listening to this podcast. Free access for life means access to features such as our Sharia-compliant current account savings products, investing into the likes of gold, crypto stocks and shares. All of these features and more, but we're only making it available to the first thousand customers, so please check this out. It's not just about avoiding interest. It's about ensuring that our money is being used to do good in the world and not for all the things that banks are putting it towards, whether it's funding wars in the Middle East, pollution, housing crisis what have you? So please sign up to Kestrel today. Thank you.
Speaker 3:Now back to the show. When you say the inheritance tax planning, I think there's this idea of are you trying to avoid tax. Are you trying to escape tax? How does it work? Exactly Because standard inheritance tax is 40 in the uk right, which is pretty steep, pretty steep. How do you get away from that? Are there other mechanisms you can use?
Speaker 1:uh, I wouldn't use the word get away, but yeah okay, no, it's how do you, within the confines exactly?
Speaker 1:no it's um, look, there's so many ways to deal with it. There's so many days ways to deal with inheritance tax. Number one is actually knowing whether you have an exposure or not. Now, for every individual there's an allowance of £325,000. So between husband and wife that's £650,000. On top of that, which is tax-free, tax-free, on top of that, you can get an additional allowance called a residence loan rate band of an extra up to £175,000 each. Sorry, call it a what? Residence no rate band? Residence no rate band, exactly Okay. So that adds on an extra £175,000 per individual sold gain. Between husband and wife it's an extra £350,000. That brings the total allowances up to a million pound. Now it might be that you only get 650 000, not the full a million, because it all depends on a number of factors. But let's say that between husband and wife a million pound allowance is available, a penny over a million pound. That's when you got inheritance tax exposure. Any value above that then you're going to pay 40 percent.
Speaker 1:Now there are certain reliefs that can be used to try and remove certain assets out of the inheritance tax charge. For example and this is a big area and big changes are coming in April 2026, is a business relief. So for any business owner that operates a normal trading business, be it a shop or a wholesale business, or a manufacturer, dessert shops, whatever it might be, takeaways, whatever it might be Historically all of these trading businesses, they could pass on that business to the next generation on death, not pay a penny in tax, because a trading business would qualify for 100% relief. However, from april 2026 that's completely changed. The government announced in last autumn that business relief will only be available at 100% for the first million pound of assets anything above that, only 50% relief.
Speaker 1:Now that might not seem. Oh yeah, it's still got relief. Let me put it into an example. Let's say mr khan. He operates a chain of restaurants. The business is worth two million pound and, in all honesty, it doesn't take much to get a business worth two million pound. In all honesty, people think, oh, it's a huge, huge number, doesn't take much to get to that number. Under the previous rules, full two million pound business passing on to next generation, no tax, no problem. However, under the new rules, there will be a two hundred thousand pound tax charge on the same business two hundred thousand one million is tax-free.
Speaker 1:tax-free then the remaining million you get 50% relief so that leaves £500,000 exposed £500,000 at 40% is £200,000. Now, £200,000, who has £200,000 lying around?
Speaker 3:That means oh, and the business isn't liquid. Exactly, you're right. Okay, exactly, but now suddenly, you have to pay that exactly that's the biggest problem.
Speaker 1:People are okay, tax bill, tax bill, but 200 000, it's number one. It's not a small number. Number two how do you pay for it?
Speaker 1:now I'm seeing so many people thinking about like you know, okay, what do we do in this scenario? Now, you're either, potentially, what we're going to see is more and more people selling businesses. You have to, yeah, because they're just like. We don't have assets, are going to be able to pay for this number one, so just sell the business, whether they sell it during their lifetime. Now, because they're like you know what? I don't have a business to, even I've got no one to pass it on to. No one's going to run the business for me, because my children are involved in other things. They don't want to run this business, so I'll just sell the business.
Speaker 1:That means selling the business during their lifetime. They are going to pay tax on selling the business. Yeah, if they haven't done planning, then they're going to still have to pay inheritance tax, because now they've swapped a two million pound business for two million pounds worth of cash and there's no relief. No relief on cash. Or if you invest it into lots of property, there's no relief. Either. So you still got inheritance tax bill, or they're going to sell it after they pass away. The family are going to be like we're just going to have to sell it, which means a fire sale, and then it just has to be solved wherever they can and then pay it over to hmrc, or people are selling other assets to fund the liability.
Speaker 1:So let's say that they had a property or two that everyone was thinking. You know what. We're going to inherit this so that that will then support the family going forward, or at least support my spouse after she's, after I, pass away. That's going to have to be sold.
Speaker 1:This is a nightmare, yeah even worse than that people are going to have to start getting into riba as well. Yeah, because they're going to take loan. Some people are going to be like I'm going to take out a loan to pay the bill, so that means getting into riba to then pay off an inheritance tax liability. Some people will be like, okay, then I'll just try and continue running the business to then pay the liability. That's probably one of the worst scenarios as well, because you're paying even more tax that way. Let's say it was a £200,000 bill. You've now got to generate profits going forward which is going to be subject to corporation tax. You've then got to generate profits going forward which is going to be subject to corporation tax. You've then got to take out that profit from the business, which is subject to a dividend tax charge. Then you're going to pay that to hmrc. So a 200 000 pound tax bill might end up at a 400 450 000 pound tax bill. It's, it's crazy.
Speaker 1:This is you know we're seeing farmers go out on the streets for marching protesting. I have no idea why business owners aren't honestly they don't know.
Speaker 3:I guess they don't know they haven't realized yet.
Speaker 1:They don't realize it genuinely, they don't realize it. This is an absolute bombshell for families. Absolute bombshell is going to change everything and this planning that can be done. So, for example, between now and april 2026 we've got a window of opportunity to do trust planning where we can utilize that 100 relief but before it goes down to 50 relief.
Speaker 1:That means that we can start to put shares in a business, trading business into trust without incurring a tax charge no matter what the value of the business is it might be a hundred million pound business, no tax charge, none whatsoever even over the one million yeah exactly because at the moment it still qualifies for 100 relief. It's from april that everything changes. But you put that same business into trust later on, or some of the shares into trust later on, you're going to have a very big tax charge oh, I see so it's when it changes in april 2026.
Speaker 3:It's only going to apply for things that weren't in a trust it applies to any business thereafter.
Speaker 1:Basically, whatever the structure is, if it's in a trust, it's already protected. Whatever's in the fine but if you put it in the trust before, exactly so now going forward, basically, business owners need to start taking action, particularly between now and april. If they don't, honestly, you're just again it's, you're hoping, you know it's um. Well, the example I just gave earlier about inaction and then regretting it later on the price later on is going to be very, very, very high not just on you on so many members of your family.
Speaker 1:Yeah, I've seen people again, families the torn apart, because they were saying to the son you're working in the business, why didn't you speak to dad and get this sorted out? Why didn't you deal with this? You made the mistake, you pay for it. All of these things come out and, by the way, people sometimes say, oh yeah, my children are fine, they're practicing. They, they won't deal with it, they won't do this. Guys, shaitan has been playing this game since day one. You are up against shaitan here. He will completely destroy your family. It's not that people are bad. Shaitan is the one that you're playing against here. He will whisper to them and make them do things that are. This is his territory this is his home pitch.
Speaker 1:He knows exactly how to exploit people, how to play them. You're leaving them fully exposed to to shaitan here. If you just take action, you're protecting them.
Speaker 3:You're protecting them from that it's a slightly more personal question. A lot of our listeners as well are startup owners, and a startup is quite a different form of business because some of it could even be pre-revenue. It might be revenue generating, but a lot of the wealth is locked up in its shares. Would it be treated differently, or would you call it? Would it be treated the same way as a trading business?
Speaker 1:It's a trading business Really. Yes, it might not have much value right now. Yeah, so the inheritance tax it depends on your wider assets in terms of whether you have an inheritance tax exposure or not, and it might be. If you're young, it might not be the first thing that's on your mind. So I'm not trying to say to every person no matter what your age, think about your inheritance tax. Yes, of course, if you've got significant wealth, it doesn't matter what your age is.
Speaker 1:You need to be thinking about it but maybe when you start up you're young, you just you know you don't have much wealth anyways, you're just just starting up, it's not a worry. But what I would say when it comes to the shaitan point is that you need to start it up. Whoever you're going into partnership with on this business, whoever you're working with, you need to get things done properly.
Speaker 1:Yeah, for sure Agreements, everything like that. It doesn't matter if you've known this person your whole life. Whether it's a family member doesn't matter. Person from the. You need to deal with everyone as if it's the first day that you're doing business, because I'm just thinking this could destroy an early stage startup very easily because your co-founder passes away right Suddenly.
Speaker 3:Some of that goes to who?
Speaker 1:If they've got an inheritance, tax exposure.
Speaker 3:Right, if they go above the million pound threshold that we mentioned earlier, which is quite easy to do for, like an early stage startup. Say, you've raised like a two million round, there you go. You're valued at maybe 10 million. There you go. Right, so the business is valued at that. So you know two co-founders each owning five million of the business To pay that off. Their family will just be like look, you've got to liquidate the company.
Speaker 1:I've got no other this, exactly all those hopes and dreams, what you want to achieve, then gone and you just need to be proactive and just be like guys. This again wealth is an amana really look after it, make sure that you're doing your responsibility and protecting it. Imagine then in a case where the family thought that, ah yes, we've got a valuable business here that inshallah is going to fund us going forward, but if they're left, that business needs to be sold and they're not left with much, then what do they now have? Where is going to be that income coming from for them? Who's going to look after them? And the thing that people are? Oh yeah, this is worst case scenario. This is worst case scenario, guys. This is. It happens very, very, very often, very, very, very often.
Speaker 3:It's the classic thing no one knows when their time.
Speaker 1:No one knows their time will come.
Speaker 3:We've talked a lot about the passing on of assets. What about debt as well? Because you could pass, pass. You could have three mortgages, four mortgages, and maybe they were conventional and you thought I'm gonna move it to islamic one day when a better product comes out.
Speaker 1:I've heard that so many times really all the time yeah, I'm gonna go halal later on, I'm gonna go halal later on, I'm gonna pay them all off later on. That's my plan. That's my plan, but it doesn't happen. Shaitan gets you in a grip, he ain't gonna let go. It's a spider's web actually, so difficult, difficult to get out of. And in that case, let's say, you passed away with those assets there needs to be paid back, the debt needs to be paid back and the family are going to have to take that on um, where the assets are sold, to then pay off that debt. Or the business continues to get run or the property portfolio continues to be run and they pay off the debt. It needs to be done. But, guys, do you really want to leave that behind for your family? And, in all honesty, when it comes to the Sharia compliance and I've talked to a lot of my clients about Sharia compliance because, well, yes, I'm a tax advisor, but we're trying to the whole the ethos of what we're trying to do as a business and even part of the wahid group, is trying to help people stay away from river, and so when we see people that are in river it's talking to them say, guys, you sure you want to continue this, guys? Is there any action you can take?
Speaker 1:I remember a client where she inherited a significant property portfolio from her husband and many, many years ago and the portfolio continued to grow A lot of conventional debt against it. And now she's a lot more older, fortunately, her health started to deteriorate and her son was like look, let's go on Umrah, let's just go. So they went on Umrah and she was really reflecting on life while she was away, anumra, and she was like, oh my god, who am I kidding? I need to get rid of all this debt. What answer will I have in front of all this to why I have all these conventional mortgages?
Speaker 1:And the thing is, it's so easy for us to kid ourselves and often during our lives we are trying to convince ourselves and the people around us to be like oh yeah, don't worry, it's fine. And oh, you're kind of fobbing things off. Oh yeah, these aren't you and Sharia compliant anyways, it's just all a hoax. And then they'd go down the conventional mortgage being like oh yeah, I just had to, I just had to. But when you're there standing in front of Allah, subhanahu wa ta'ala, you realise just how weak that argument is and you're like I've got no leg to stand on. I was just kidding myself all this time. So when she came back she told her son we need to deal with this. Wow.
Speaker 1:The son reached out to me and said and said, razwan, we need to do some inheritance tax planning. Um, can you support us? Spoke with the family and I was trying to understand their objectives and I saw the conventional mortgages. I was like one minute, what's your thoughts about these conventional mortgages, guys? Do you want to get rid of it? Here we're doing some planning. Why don't we try and just at least at minimum try and turn this into a sharia compliant mortgage? At least you're in some pay, a position of safety. You don't need to be in a conventional mortgage at all.
Speaker 1:And the mom opened up 100. I don't want any mortgage whatsoever. And I was like one minute. Then, if that is your primary objective, and she was like the others are distant, second, third, far distant second third, I do not want to pass away with this debt on my head. Everything else my family can deal with. If they need to sell properties, they'll sell properties to pay the taxman, but no way do I want to stand in front of Allah with this on my head.
Speaker 1:And when we talked about it and we went through the scenarios, the focus was just about let's get you out of this debt. Forget all the other tax planning. Now this is one thing we're focusing on, and my project with them has basically been how can we get rid of all this debt in the most tax-efficient way? So, one by one, we were picking out the right properties to start selling pay off mortgages as quick as possible, just one by one, trying to sell them off and then trying to get to a position where certain ones we would then refinance into a Shreer-compliant mortgage Really Okay. But we had to only do that when the renewal window would come, otherwise it would be a loophole, exactly.
Speaker 3:Right, because then you'd pay some penalties.
Speaker 1:Exactly, lots of penalties, exactly so we again, we were trying to do things on a journey here. Which ones can we deal with easily straight away? Which ones are going to be in year one, year two, year three, year four?
Speaker 3:I guess the benefit of this is, you know, inshallah not, but if, if this lady does pass away during this process as well, the plan is now in place for what's going to happen.
Speaker 1:She's on her journey, she's making and she really sincerely wants to get out of this. And for me, yes, they're making some tax savings along the way because of how we're dealing with certain things, but look what we're helping achieve for her in front of Allah, subhanallah, that means more than anything. Well, that means more than anything, walahi. That means more than anything. And genuinely, the thing is, sometimes we kind of just get into this kind of no, I'm here to just deal with tax planning and we realize that the clients put so much trust into us and the thing is they want someone that will give them, yes, tax advice, but also to be able to guide them, especially if they're coming to Muslims. They want to deal with Muslims so they can talk to them openly, but also guide them in the right way. They want people to be able to support them like this, give them honest advice.
Speaker 1:Look if my father was in this and I say this to many clients if my father was in the same situation as you, what advice would I be giving him? It should not be any different. No way should the advice that I'm giving to a client be any different from the advice I would be giving my father if the scenario was exactly the same.
Speaker 3:I think a lot of people are thinking, okay, this is great. I'm very scared now. No, no, but I think that's the good thing, right, to get people to actually go into action. But is this expensive to do? No, no, no, no, no, no, no look, number one.
Speaker 1:let me say that, um, it's, everything is on a scale in terms of tax planning, in terms of you know how much it can cost people, but tax planning should always be a small fraction of what the overall value is going to be to the client. So it's not like I'm going to charge someone X when the value that's saved is just a little bit more than X. No way, it shouldn't be like that. It should always be much, much, much, much more the value saved should be much, much more than the fees, Exactly 100%, 100%, no doubt about that.
Speaker 1:And number two is that everyone wants best bank for buck. Everyone wants that, but the only way you can determine what is best bank for buck is by having transparency on what's being presented to you in terms of the tax planning. Okay, then you know what present to me all the options that I have, what are the pros and cons, what are the tax savings, what are the pros and cons, what are the tax savings, what are the tax costs for putting this in place? So then we can compare and contrast all the pros and cons and then we can clearly see it on paper the numbers, everything. It shows me these are the options that are going to be best for me.
Speaker 1:So many times we go in through that whole exercise of just very transparent presenting it all to the client. The numbers are there, they're very clear, showing to clients that I'm not even trying to upsell to you here. There's nothing here to upsell because this shows you that this is the best solution. That's it Simple, as and by doing that I've done it with many clients what I've found is that sometimes the most simplest thing that actually wasn't even technically classless tax planning was what was delivering the highest benefit for them and I've said to them that's all you need. Again, if my father was in your scenario, what would I be saying to him?
Speaker 3:Because technically, I guess moving to a different mortgage is not tax planning. That's not tax planning.
Speaker 1:Getting rid of debt. That's just holistic planning in terms of everything else they want to achieve in terms of objectives. But how do you go about achieving all these objectives that you have? Whether it's getting out of mortgages, whether it's succession planning, whether it's growing your wealth in a tax efficient manner, whether it's whatever it might be for your family, tax has a part in it, because it's got something to do wealth.
Speaker 3:So so let's, let's make a scenario and then, if you could give me a step by step of how it would work. Say there's a father, he has two adult sons, you know, maybe one of them is working, um, you know, just in, like a conventional job, maybe he's a lawyer, uh, and the other one has his own business. Say one of them comes to you and just says this isn't you.
Speaker 1:No, I have another brother, so it's a different thing but yeah, no, it sounds similar.
Speaker 3:Um, but would the family come together and just say like look, can you? You know we have all of this stuff or would you recommend just one person comes individually?
Speaker 1:there's no, necessarily whatever way works best for you, but what I do say to a lot of clients is that, look, you have an opportunity here to to nurture your children and showing them how it's done. If you do things all behind closed doors, without their involvement, how are they going to learn? What are they going to do in the future? You should give them an opportunity to be part of it. The more that they learn now, the more likely that they won't make the same mistakes in the future, because they are now more informed but step by step.
Speaker 3:Would you recommend starting with the will and then everything else flows from there?
Speaker 1:I think, just have a conversation, just say that, look, let's have a conversation about what's going on at the moment. What is your scenario? You know what are your assets, what's the family dynamics? What are you trying to achieve going forward? What are your major worries, um, and you know what are your plans for the family. Do you want to protect assets? Are you worried about one son? Um, you know what are your plans for the family. Do you want to protect assets? Are you worried about one son? Um, you know what they're involved in. Or maybe the marriage, all these things. It's very much. I want to know everything. Understand you, yeah, your business, your assets, and what makes you tick what? What are your worries? Because tax planning is it's just about helping people achieve their objectives so that's all it is.
Speaker 3:You mentioned something very interesting. Say you've got a parent who's worried about one of their children and what they're involved in does that imply you could have a situation where you leave some money for them, you leave an asset for them, but they're only able to access it if they do x, y and z, for example.
Speaker 1:You might have some assets in the trust for them, for example, yeah, just to have it protected. So that again that, yes, it's their right, they can access it. But there's some discretion there. One minute, can we just check what's going on at this? Are you still in this habit? Are you still mature enough to, you know, take on this responsibility of this wealth? Um, you know, and you can test the waters then with that son, you know, give him a little bit, see what they do with it but how do you do that?
Speaker 1:trust gives that little bit of a protection layer. Can a trust do that legally, of course? Of course it can, really. Yeah, exactly, it's protected, the discretionary trust you would put in place and then the discretion lies with the trustees. They trust you would put in place, and then the discretion lies with the trustees. They're the ones that are responsible for then assessing how and when those children, the beneficiaries, can benefit so it'll be responsible individuals, so it might be.
Speaker 1:Maybe it might be the the parents at the start yeah and then, after they're passing, it might be, you know, some professionals, it might be other family members, but it has to be someone that's trusted and responsible and then they are the ones that then say, okay, then what needs to be done here? It's a fiduciary responsibility on them, a legal responsibility that then they have to follow the wishes of the person who set up the trust. So if they're saying, look, I don't want my son to benefit from this wealth until he is mature enough to take on the wealth, he's cleaned up his act exactly stable in the marriage, everything like that.
Speaker 1:Fine, you can stipulate whatever needs to be done, but at least then all of that is there in place and then the trustees can make that judgment call I think we're gonna have to get haroon on 100. Honestly it's such a fascinating area and people when they realize what options there are, because a lot of people they hesitate to take action. It's kind of like a deer in the headlights don't know what to do.
Speaker 3:So we just stand there. Plus, it's happening in such an emotional time because you've just lost such a powerful member, someone you're very close to, exactly, and now you have to deal with all of this, but you shouldn't have to wait until someone's passed away to do this this should be done proactively during lifetime.
Speaker 1:Again, you show your kids how you deal with and be responsible with wealth.
Speaker 3:That's the lesson I've taken from this. I think, like this, knowledge is so powerful and it's so lacking in our community, and I just think you only have to do this for one generation, and then all the other generations will remember and they'll know, and they'll have to do it for themselves as well, and it would fundamentally shift how we deal with wealth as a community, how muslims deal with money I would say that we're a community that we are very new to wealth.
Speaker 1:Still we haven't gone through the cycles that other communities have, where generational wealth, they understand generational wealth and how to build generational wealth. We're new into it still, so we're learning how people have built wealth, not how they've successfully passed it on yet and the only way that our community will continue to grow is if we start learning that, because otherwise 40 is going to hmrc or the rest is going on other things that we don't want it to go towards. You know, breakups with the family, legal fees because of disputes, xyz because it was given to people that were not responsible enough to take it on, family members that weren't ready for it.
Speaker 3:What's your takeaway for listeners today. What should it be? Should it be if you're a business owner? We should organise a protest and go around. Downing. Street, like the farmers did.
Speaker 1:I think you need to gain knowledge on how it's impacting you. Just speak to someone, speak to your accountant and they'll put you through to a tax advisor, or reach out to a tax advisor if you know one already. Remember it should be a charter tax advisor because it's a different game from an accountant completely different game. It's like a difference between a gp and a heart surgeon. The analogy that's given account is the gp. The heart surgeon is a chart tax advisor.
Speaker 3:They specialize in this area you wouldn't want your gp to like, just prescribe you some, some paracetamol exactly paracetamol is the cure for everything, isn't it?
Speaker 1:But no, if you've got a particular problem, you need to get the right solution to it, and that's what a charter tax advisor should do, of course, reach out to myself More than happy to talk it through with them. Just understand what the next step is. And again, it's not that you, straight away, want someone to put planning in place for you, but you want someone to guide you through. Okay, when's the right time to take action? Should I be doing something immediately? Should I just be waiting? Do I even have an issue right now? Is it as simple as just getting a will in place straight away and then just waiting and seeing how things evolve?
Speaker 1:But it's someone that isn't trying to look at trying to sell you something, but it's trying to advise you in a responsible way. This is why I love dealing with Muslims, because I think it's something that is lacking within our community that honest tax advice saying that I'm not just trying to sell something to you here, but I want to make sure that your wealth is just like my family's wealth and I want it spent in the right way, and I'm only going to advise to you what is best to do immediately, if it's right to do something, I'll tell you what needs to be done.
Speaker 1:Then thereafter I'll guide you in the right way yeah, but find someone that's going to do that for you, whether it's myself or someone else, but please take action. That's an absolute how should people reach you um, they can reach out to me on linkedin. My name is roswan Buta. It has CTA at the end of my name. You can contact me on LinkedIn. That's probably the best way.
Speaker 3:We'll put the link in the bio.
Speaker 1:Yeah, put the link in the bio Reach out to me Happy to book in a free consultation with anyone that wants to chat, and we'll just take it from there.
Speaker 3:Amazing Roswan. Thank you so much for your time. As Thank you for listening to the Muslim Money Talk podcast. If you like what you heard, then please subscribe to Muslim Money Talk. Wherever you might have been listening to this, give us a like and share it with someone who you think might be interested. It really, really helps us out. Thank you, as-salamu alaykum, and see you next time.