According to the Office of Budget Responsibility, IHT receipts are projected to increase to £6.4billion by 2022/23 despite the introduction of the Residence Nil Rate band.
According to the Resolution Foundation, the current IHT regime should be scrapped entirely. But the likelihood of such a major reform while we remain in a state of Brexit uncertainty seems remote. The reports of the government’s search to find ways to resource the NHS through raids on pension tax reliefs and unspent EU membership fees shines a light on current capital requirements.
In that context, IHT and estate planning will continue to be crucial for those looking for tax-efficient wealth transfer to the next generation. There is certainly an increasing audience of those with a potential need for it: Statistics show that there are 10,050,000 over 50s in employment in the UK – the equivalent of the population of Sweden. (ONS Jan 2018) This is a record number and it is not hard to envisage a large number of them soon turning their thoughts to preserving their hard-earned legacy for their children.
Current demographic trends in the UK mean the numbers are only going in one direction; over 20 million of the UK’s 66.5million population are currently over 55 years of age. By 2020, there will be another million and by 2030 the UK population is projected to be 70,370,000 with over 24 million over the age of 55.
No wonder recent research with advisers reveals the growing stated importance of IHT and estate planning to their advice proposition. There is also anticipation of further growth, partly because advisers say that over a quarter (28%) of their core client base should have seriously considered IHT and estate planning but have not yet (Cicero Research).
Source: Moneymarketing
Source: Moneymarketing
So, becoming familiar with the methods to mitigate IHT looks like a good idea. And yet, the reality doesn’t seem to match up with the drivers and expectations, particularly when it comes to some of the planning options: In 2015/16, almost 900,000 people died in the UK. 47,900 estates were above the nil rate band and of those only 2190 claimed Business Relief.
Business Relief can provide a level of flexibility and speed that other solutions simply can’t and in some instances, it can be the only viable option. So, it’s a useful addition to a planner’s toolkit, and one that can potentially differentiate their advice offering and meet difficult planning needs.
The Oxford Capital Estate Planning Service allows advisers and their clients to select their underlying investment strategy based on the need for income, faster access to capital and the potential for higher returns. The ability to switch between options as an investor’s needs evolve, including regular dividend payments makes it an attractive alternative.
For more information about Oxford Capital’s Estate Planning Service, click here.