Growing adviser demand for specialist IHT planning support

Advisers are increasingly looking for support on Inheritance Tax (IHT) planning as client demand for advice increases, new research* from investment manager Downing shows.

In Downing’s survey of UK financial advisers and wealth managers, more than half (51%) say they would value more support from providers of specialist IHT planning solutions, while almost all (93%) say their firm works with lawyers or accountants for additional expertise.

IHT raised £7.5 billion in the 2023/24 tax year compared with £7.1 billion in the previous year** and receipts are forecast to rise further. With the recent Budget changes, further increases on the number of estates affected by IHT are also expected.

Rising IHT receipts and policy changes drive need for expertise

The Chancellor continued the freeze on IHT thresholds at £325,000 plus £175,00 if a home forms part of the estate until 2030 and included pensions as part of an estate, subject to consultation. The Chancellor also changed the potential tax relief available on Business Relief qualifying assets: currently all Business Relief assets benefit from 100% IHT relief. After April 2026, unlisted Business Relief assets and Agricultural Relief assets will benefit from a £1,000,00 allowance, where the assets will continue to benefit from 100% IHT relief. Thereafter, the tax relief will be reduced to 50% (an effective IHT rate of 20%). AIM-listed shares will not have the £1,000,000 allowance.

Downing’s research shows around 42% of advisers already receive support from specialist IHT providers and 50% work with both accountants and lawyers to source additional expertise. Around 40% work just with accountants, while 3% work solely with lawyers and a further 6% plan to work with accountants or lawyers in the future.

More than four out of five (81%) of advisers questioned employ specialists who only advise on IHT planning and more than half (52%) believe their firm is very experienced on IHT planning solutions. However, 45% describe themselves as only quite experienced, while 3% admit they are not very experienced.

Advisers believe clients are generally knowledgeable about IHT planning solutions – 43% say their clients are well-informed, while 49% describe them as quite well-informed.

More IHT planning support needed as adviser demand grows

Mark Dunn, Head of Retail Sales, at Downing says: “IHT planning is growing in prominence as part of advisers’ workload and as part of their client base as more clients focus on tax efficiency.

That is highlighted by how many firms employ specialists who only focus on IHT planning and the growing business relationships with lawyers and accountants to source further expertise.

It also explains the demand from advisers for more support from providers of specialist IHT planning solutions. Providers need to work harder to ensure advisers receive the help they need.”

Downing’s IHT planning solutions aim to provide IHT relief after two years if held at the date of death by allowing investors to invest in unlisted and AIM listed Business Relief-qualifying companies.

Downing Estate Planning Service invests predominantly in asset-backed trading businesses, in sectors such as care homes, lending to property developers and renewable energy. The Downing AIM Estate Planning Service invests in a diversified portfolio of 25 to 40 companies that are listed on AIM, and is also offered in an ISA wrapper.

For more information go to Inheritance Tax Solutions - Specialist IHT Products | Downing.

Sources:

* Downing commissioned independent research company PureProfile to interview 100 UK financial advisers and wealth managers using an online methodology during November 2024.

** HMRC tax receipts and National Insurance contributions for the UK (annual bulletin) - GOV.UK

Important notice

‍Opinions expressed represent the views of the author at the time of publication, are subject to change, and should not be interpreted as investment or tax advice.

Important notice: This article is for investment professionals only. This article is for information only and does not form part of a direct offer or invitation to purchase, subscribe for or dispose of securities and no reliance should be placed on it. No reliance should be made on this content to inform any investment of tax planning decision.

This content contains information that is believed to be accurate at the time of publication but is subject to change without notice. The explanation of all of the tax rules set out have been written in accordance with our understanding of the law and interpretation of it at the time of publication.

Whilst care has been taken in compiling this content, no representation or warranty, express or implied, is made by Downing as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.