IHT advice set to rise over next three years

IHT advice set to rise over next three years

The number of retail investors seeking help with inheritance tax planning is set to increase over the next three years, research has claimed.

A poll among advisers, carried out by Time Investments in July, indicated that three out of four advisers believe the demand for IHT planning will rise.

Moreover, 60 per cent of those polled predicted there would be an increase in the number of IHT products and investment solutions to be launched in the UK.

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This comes as HM Revenue and Customs (HMRC) reported that IHT receipts hit a record £5.2bn in 2017 to 2018, despite the introduction of an additional nil-rate band to help people mitigate IHT.

Henny Dovland, IHT expert for Time Investments, said: "The number of families in the UK being caught in the IHT net is increasing. 

"This represents a significant opportunity for advisers specialising in IHT and intergenerational planning and is reflected in our findings that reveal more specialist products are set to be launched in this market."

However, she added that care needed to be taken to ensure any new solutions are fit for purpose. 

Moreover, while the growing marketplace will offer more choice to investors, Ms Dovland suggested this also comes with a health warning, as 88 per cent of advisers questioned were concerned that new products will be launched by firms that do not have the appropriate track record or expertise.

Two thirds of advisers also predict an increase in the use of Business Relief, formerly known as Business Property Relief, over the next three years to help people reduce their IHT liabilities.

To encourage investors to support UK businesses, the government allows shares held in qualifying companies that are not listed on any stock exchange and some of those listed on the Alternative Investment Market to qualify for Business Relief.

This means that once owned for two years, the shares no longer count towards the taxable part of an inheritable estate and are free from inheritance tax at point of death.

The accessibility of Business Relief investments and the range of investment opportunities available help to provide flexibility in IHT planning. 

Three quarters of advisers felt that the increasing use of power of attorney due to rising dementia rates would contribute to the growth in the use of these flexible IHT solutions.

Commenting on the HMRC tax intake from IHT, Rachael Griffin, tax and financial planning expert at Quilter, said: "As more people fall within the inheritance tax net it seems that Benjamin Franklin’s often quoted phrase needs to be reworked to say ‘nothing is certain except tax on death’."

The average taxpaying male-owned estate has a tax liability of £182,000, with females' estates having to pay, on average, £176,000.