HM Revenue & Customs has launched an inheritance tax (IHT) tool in beta via the government’s website to help consumers calculate whether they will need to pay the tax.
Customers are asked to enter an estimated value of their combined assets and if this exceeds the threshold for IHT, they are directed to further information on reliefs which could reduce their IHT liability.
Currently, gifts of more than £325,000 in inheritance are taxed. The amount of tax depends on the total gift amount, and can reach up to 40 per cent of total wealth passed on.
Kim Jarvis, Canada Life’s technical manager, said: “The tool is not a calculator and clearly doesn’t replace good financial planning or the role of advice, but it is a welcome development by HMRC.”
It does not calculate the amount of IHT an individual would have to pay, or inform HMRC about the estate’s final value.
“IHT is by its very nature a complex area of financial planning, but this tool should prove valuable to those who are unfamiliar with the process and the forms requiring completion,” Jarvis added.
Uptick in advice
In recent months, research has shown an uptick in demand for advice around IHT.
The Openwork Partnership, a network consisting of some 4,300 financial advisers, published a survey in June which found nearly two out of five (38 per cent) of its advisers have seen an increase in demand from clients for advice on IHT planning in the past year.
Currently more than 11 per cent of their advisers’ client bases are seeking advice on IHT.
Mike Morrow, the network’s chief commercial officer, put the uptick down to clients reassessing their finances in the wake of a global health crisis.
Advisers do not anticipate this demand to slow either. Some 60 per cent said they expect demand to rise in the year ahead, with 19 per cent estimating a “significant” increase.
As well as Covid-19 increasing interest in financial reviews, the network also put the growth in IHT advice down to a greater awareness of the impact of IHT (56 per cent), advisers proactively discussing it with their clients (47 per cent), rising property prices (43 per cent), and pensions being more attractive as a way of passing on wealth (41 per cent).
In terms of clientele, a quarter (25 per cent) of The Openwork Partnership’s advisers have seen an increase in the number of families visiting them for advice in the last 12 months.
“It’s good to see more people enlisting the help of a professional and parents bringing their family along to start the adviser process early,” said Morrow.