Your IndustryNov 25 2013

IHT Research Report - November 2013

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Approx.60min

    IHT Research Report - November 2013

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      Approx.60min
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      Introduction

      By Nyree Stewart
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      As the macro environment improves house prices, share prices and the value of other assets are all likely to start rising, meaning more people than ever before could get caught within the IHT net with estates in excess of £325,000.

      After a dip in receipts following the financial crisis, the latest annual figures from the Office for National Statistics (ONS) show the value of inheritance tax receipts in the 2012-13 financial year totalled approximately £3.15bn, an 8 per cent increase from the previous year.

      The findings from a survey carried out by Financial Times Publishing into protection and inheritance tax planning shows that advisers generally have a good knowledge of IHT, but are not – for the moment at least – devoting the lion’s share of their attention to the area.

      For the majority of respondents – 64.4 per cent – IHT planning only accounts for 25 per cent or less of their overall business proposition, with only 1.6 per cent reporting IHT planning forming 75 per cent or more of their business. In spite of this low figure, 85 per cent of respondents claim to be fully informed of the IHT limits and the point at which they tend to change.

      But with the IHT threshold set to stay at £325,000 until 2018, more than half of the respondents (51.5 per cent) strongly or very strongly agree that the threshold should be raised earlier. Only 13.9 per cent of advisers believe that the limit should stay as it is.

      The results highlight that while advisers are well prepared on IHT planning, and have their own views on what it should and should not include, their clients may be equally aware of the consequences of not planning for the future.

      Just over half of the respondents (52.6 per cent) note that they have not seen an increase in the number of clients requiring advice on IHT planning, while 30.4 per cent state that less than a quarter of their clients were initially unaware of the need to plan for IHT.

      A total of 10.8 per cent of advisers acknowledged that more than three-quarters of their clients were unaware of IHT rules. While the type of client this includes is unclear, it could suggest a knowledge gap somewhere among people who perhaps don’t realise exactly how much their estate could be worth.

      In the tax year for 2010-11, approximately 47 per cent of all deaths were notified for probate, and of these 3 per cent had to pay IHT, equivalent to 15,584 estates. The figures from the ONS highlight a 7 per cent increase in IHT receipts year-on-year to 2011-12 and a further 8 per cent increase to 2012-13.

      With the threshold set to stay static at the same time as asset values increase, the likelihood is that IHT planning is going to become more of an issue and advisers will need to ensure any knowledge gap among clients is closed quickly.

      Nyree Stewart is deputy features editor at Investment Adviser

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