Advisers are likely to see a surge in demand for inheritance tax planning as rising property prices and frozen thresholds drag more people into the net, says Utmost Wealth Solutions.
The proportion of deaths subject to IHT is set to double from 5.1% in 2022/23 to nearly one in 10 (9.5%) in 2029/30, according to the Office for Budget Responsibility. The forecast follows Chancellor Rachel Reeves’ announcement in the October Budget that the freeze on IHT thresholds would be extended by two years until 2030.
The inheritance tax system will also see reforms for Resident Non-Doms (RNDs), removing the link between domicile and IHT. It means RNDs resident in the UK for over four years will be subject to UK taxation on their worldwide income and gains. IHT will follow them when they leave the UK if they have been a UK resident for 10 out of the last 20 years with this new status taking as long as 10 years to lose.
This creates a ‘growing opportunity’ for advisers to help clients efficiently manage their estates as more and more become liable to pay IHT over the coming years, said Utmost Wealth Solutions.
Marc Acheson, global wealth specialist at Utmost Wealth Solutions, said: “Inheritance tax is often badged as one of the UK’s most unpopular taxes but can be perceived as ‘voluntary’ in that there are steps that can be taken to reduce its impact.
“The reforms announced by the Chancellor will create a growing opportunity for advisers as more and more individuals seek help in navigating the new rules with the OBR estimating that, by the end of the decade, twice as many people will be impacted by IHT every year.”
Acheson said the firm expects to see a “surge” in demand from individuals looking to re-engage advisers and reconsider their plans.
“The clampdown on the number of assets exempt from IHT will see strategies shift to lifetime gifting earlier and more often to individuals or trusts as well as spending pension pots.
“The Budget is also likely to increase interest in insurance policies and death benefits that can protect individuals against IHT liabilities while unit linked life assurance could help advisers defer tax for their clients until a chargeable event occurs,” he added.
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