Estate Planning Services in High Demand Thanks to Budget
Yesterday, Rachel Reeves announced some very important and significant changes to the UK’s tax system. Amongst them were announcements concerning the inheritance tax rules.
Inheritance tax thresholds that have been in place since 2009, including the nil-rate band (NRB) of £325,000 and the residence nil-rate band (RNRB) of £175,000, have been frozen until 2030. Meaning the real value of these reliefs will diminish even further over time, leaving more families with estates that surpass the tax-free limit. This fiscal drag is shifting IHT from a tax that once mainly targeted the wealthiest estates to one that increasingly affects middle-income households, particularly those with substantial residential property assets.
Property Prices & Pensions Added Will Pull More People into Threshold
Over the years, according to the Office for Budget Responsibility (OBR), UK house prices have climbed significantly, rising by more than 70% between 2009 and 2022 alone. According to Savills, this trend is far from over: they forecast that house prices will increase an additional 21.6% by the end of 2028, meaning that many more estates will exceed the IHT threshold simply due to property value appreciation
Additionally, individuals’ pension pots will be subject to inheritance tax from April 2027 too, this will significantly increase the estates reaching the inheritance tax threshold. More individuals will find themselves seeking professional advice from estate planners to help navigate their new situation.
More Business Owners and Farmers Will Need Advice
Specialist advisers to farmers and business owners can expect higher demand following recent budget changes too. The rules around agricultural property relief (APR) and business property relief (BPR) are being adjusted, introducing a new cap of £1 million on the current 100% relief for agricultural and business assets. Property values exceeding this threshold will face an effective tax rate of 20%. This change aims to protect smaller family farming operations while applying tax to high-value agricultural land and businesses. Advisers with clients looking to transfer farms or businesses should review estate plans to ensure their advice remains solid under the new rules
Estate Plans with Alternative Investment Market Shares (AIM Shares) Might Need Adjusting
AIM shares have traditionally been a popular tool for reducing taxable estates, as they qualified for 100% inheritance tax relief. However, this relief will soon be reduced from 100% to 50%. Individuals who have used AIM shares to lower their IHT exposure should review their estate plans and explore additional strategies to minimise tax liabilities. Professional advisers should proactively reach out to clients with AIM shares in their estate plans, as they may now require updated guidance to achieve optimal tax efficiency.
The Projected Growth of the Market, More Families Affected
This new budget means that professional advice in the estate planning space will be in more demand than ever. In 2020–21, only 4% of deaths resulted in an IHT charge, but projections show this figure could rise to over 7% by 2032–33. Furthermore, the Institute for Fiscal Studies (IFS) also anticipates that by 2032–33, one in eight people (12%) will face an IHT bill on their death or on the death of their spouse or civil partner.
The IFS also reports that, in 2023, IHT receipts reached approximately £7 billion, accounting for 0.3% of the UK’s GDP. However, forecasts indicate that by 2032–33, IHT receipts could exceed £15 billion, more than double the current level and representing 0.5% of GDP.
The growth in IHT revenue highlights the increasing importance of IHT planning for families seeking to preserve their wealth. This projected tax burden signals a growing role for estate planners, as individuals seek out professional advisors who can help them navigate this complex area.
Ensure You Can Meet Demand
As demand in the estate planning market grows, firms must ensure they are prepared to meet it effectively. Digital tools, such as estate planning software, can streamline processes and drive efficiencies, enabling firms to scale more easily in response to rising demand while reducing the risks associated with high workloads. Additionally, estate planning software offers clients convenient options for digital interaction with their advisers, resulting in quicker turnaround times, reduced administration and an enhanced customer experience. By embracing these tools, firms can better position themselves to meet opportunities head on in a fast-evolving market.
For more information about how estate planning software can help position your business to take full advantage of growing demand, explore our website.
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