Tax  

Frozen IHT thresholds will impact 'twice as many clients as LTA'

“It’s so easy for even modestly well-off clients to imagine a scenario where they are impacted by LTA and IHT in equal measure. Personally I’d think the pensions are more prone given the longer term outlook for equities, but clearly property is an ever-present factor, and larger estates being impacted by the tapering over £2m. 

“For me, the biggest margin is gifting, with us helping clients to be more confident doing it. But business relief will become ever more popular I am sure.”

Business relief is an aspect more people are talking about now. Last week (May 20) at the Paraplanner Conference, run by the Chartered Institute for Securities & Investment, Time Investments strategic partnerships manager Harry Donoghue also outlined different planning approaches when advising on inheritance tax and how business relief can tie in with that

However, MFP Wealth Management chartered financial planner Justin King said the research seemed to be forgetting “unwrapped investments” such as £2000 dividend allowance and £12,300 capital gains tax.

He said: “It doesn’t escape IHT but does allow planning. Business relief if needed can be done two years before death; you can only get relief if the deceased owned the business or asset for at least 2 years before they died.”

Russell & Co Financial Advisers IFA Tim Morris said his views on these taxes had changed.

He explained that previously he felt strongly about the number of estates being “dragged into the realm of IHT” purely based on the price of properties in London and the South West.

“This seems to be penalising many people who saved hard to buy a home many years ago and have seen prices spiral due to the ever increasing pull of London,” he said. “

"That may sound great, yet many of those affected in future will have missed out on DB pensions and find they will have increasing pressures of paying for care in their old age. Many are relatively cash poor.”

However, he said his change of heart was an example of how things would change post-Covid.

“There’s been much talk of some kind of wealth tax and I can see the sense in this. We actually already have a wealth charge upon death. And now residential properties that are someone’s main home up to the value of £1m can be exempt, it penalises less of the ‘asset rich, yet cash poor’ home owners."

He added: “The good thing about IHT is that it is arguably a voluntary tax. With some careful planning and simply by making some lifetime gifts, you can reduce or even fully mitigate any liability. Even ensuring pension allowances for both spouses can help achieve this.”