Three fifths (59%) of financial advisers believe recent inheritance tax changes will increase demand for advice as clients seek more specialist support, says Transact.
Following the Government’s decision to include pensions within the scope of inheritance tax from April 2027, advisers have reported a clear shift in client priorities towards estate and intergenerational planning.
According to Transact’s survey of 260 advisers, three core strategies are expected to play a central role in client plans over the coming years. More than half (54%) of advisers cited trust-based planning, while 47% listed gifting out of surplus income. A slightly smaller number of advisers (44%) cited investment bonds.
The latest Transact Inheritance Tax Index found the number of UK households potentially liable for IHT as a result of the 2027 reforms is projected to more than triple from 1.6 million to 5.1 million.
Andrew Cullen Jones, chief development officer at Transact, said: “The inclusion of pension wealth for inheritance tax purposes will fundamentally alter the financial planning landscape for families who previously fell below the threshold.
“We are already seeing advisers respond with more proactive and sophisticated strategies, from the use of trusts and gifting plans to reassessing pension withdrawal approaches. These reforms will make tailored financial advice more valuable than ever, ensuring clients can manage their exposure and pass on wealth efficiently.”
The findings come as the latest data from the Government reveals inheritance tax receipts totalled £4.4 billion between April and September, which is £0.1 billion higher than the same period last year.
Stephen Lowe, director at Just Group, said: “Inheritance tax continues to prove a treasure trove for the Chancellor. Rising asset prices, frozen thresholds and a tightening of the exemption regime are all combining to drive ever-growing receipts.
“The Treasury now looks set to collect a fifth consecutive record annual haul. With further reforms that were announced at last Autumn’s Budget yet to be implemented, we can expect this trend to continue and grow.”
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, expects to see people looking to gift money away earlier to avoid a big tax bill as speculation around further inheritance tax changes mounts.
“Current rumours say we could see a cap put on lifetime gifts for instance. There’s also potential for the various thresholds to be tinkered with and these could see more people dragged into the net.
“The likelihood is that we will see people look to get ahead of any changes and start making use of their allowances as they currently stand to gift money to loved ones while they can and potentially save them a tax bill. However, it’s hugely important that if you do plan to give money away that you don’t gift away too much too soon and potentially leave yourself struggling later on,” she said.
Main image: alexander-grey-om4O_x_qWD8-unsplash
