A ‘surge in demand’ for advisers is likely as 1 in 10 deaths set to trigger inheritance tax charge by end of the decade, says Utmost Wealth Solutions, citing the proportion of deaths subject to IHT projected to double from 5.1% in 2022/23 to 9.5% by 2029/30.
The calculations mark an increase of over 30,000 deaths every year paying IHT as more estates caught in tax net by reforms.
Utmost Wealth Solutions said in a statement on 13 November that “frozen thresholds and non-dom changes will create a significant opportunity for financial advisers to support more clients with wealth transfer”.
Additional forecasts by the Office for Budget Responsibility (OBR) released alongside the Budget demonstrate the significant impact of changes made to the inheritance tax (IHT) regime.
The reforms create a ‘growing opportunity’ for intermediaries to help clients efficiently manage their estates as more and more estates are caught in the IHT net over the coming years, according to Utmost Wealth Solutions, a leading provider of insurance-based wealth solutions.
In supplementary tables from the Budget, the OBR estimates that the proportion of deaths subject to inheritance tax will rise from 5.1% in 2022/23 to 9.5% by the end of the decade (2029/30).
It marks a near-doubling of those being caught by IHT with the number of deaths subject to inheritance tax rising by over 30,000 with expectations that it will increase from 35,000 to 66,600 over the same time period.
The UK Chancellor announced in the Budget that the freeze in the Nil Rate Band and Residence Nil Rate Band will both be extended a further two years until 2029/30. In addition, Rachel Reeves instigated major changes to Business Relief and Agricultural Property Relief as well as (subject to consultation) eliminating pension death benefits.
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 UK resident for 10 out of the last 20 years with this new status taking as long as 10 years to lose.
In comparison, currently RNDs see no IHT payable on death on their non-UK assets and are exempt from worldwide exposure unless UK resident for 15 years. At this point they are deemed domiciled and subject to IHT on worldwide assets but could, in theory, shake this deemed domicile position after being outside the UK for 3 full tax years.
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.
“In the short-term, we expect 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.”
