Inheritance Tax (IHT) is becoming a growing concern for many families, as HMRC’s latest figures reveal a relentless increase in tax receipts. With the government taking in a record-breaking £639m in IHT in January alone—a 15% jump from last year—more estates are being dragged into the tax net. If you’re looking for ways to protect your wealth and ensure your legacy is preserved, now is the time to seek expert guidance.
Why Is IHT Rising So Rapidly?
Several factors are driving this surge in inheritance tax:
- Frozen IHT thresholds: The nil-rate band has remained at £325,000 since 2009, failing to keep up with inflation and rising property values.
- New pension rules: From April 2027, unused pension funds will be subject to IHT, removing one of the key tax-efficient ways to pass on wealth.
- Escalating property prices: Many middle-class families, particularly in the South East, now find their estates exceeding the IHT threshold.
- Upcoming changes to reliefs: Adjustments to Agricultural Property Relief and Business Relief could make it harder for farmers and business owners to pass on their assets without a hefty tax bill.
With IHT receipts expected to hit £8.3bn this tax year and projected to nearly double to £13.9bn by 2029/30, it’s clear that more families will be affected. But you don’t have to accept this tax burden without a plan.
How Can a Holistic Financial Planner Help?
A holistic financial planner focuses on strategies rather than products. Unlike traditional financial advisers who may push investment products, a holistic planner helps you craft a tailored, tax-efficient plan aligned with your values and life goals. Here’s how:
1. Making Full Use of Allowances and Exemptions
A financial planner can ensure you’re making the most of:
- Annual gift allowances (£3,000 per year, plus small gifts of £250 per person).
- Potentially Exempt Transfers (PETs): Gifts made more than seven years before death are IHT-free.
- Spousal and civil partner exemptions: Assets left to a spouse or civil partner are exempt from IHT.
2. Using Trusts for Tax Efficiency
Trusts can be a powerful way to reduce your IHT liability. By placing assets into a trust, they may no longer be considered part of your estate. However, trust rules can be complex, so expert advice is crucial.
3. Strategic Asset Equalisation Between Spouses
By balancing assets between spouses or civil partners, you can maximise tax-free thresholds and exemptions, ensuring that the tax burden is minimised when passing on wealth.
4. Smart Use of Business and Agricultural Reliefs
If you own a business or agricultural land, you may qualify for up to 100% IHT relief. A holistic planner can help you structure your estate to take full advantage of these exemptions before rule changes come into effect.
5. Reviewing Your Pension Strategy
With pensions soon to be subject to IHT, financial planners are advising clients to rethink their retirement and estate plans. This could include withdrawing pension funds earlier or shifting assets into other tax-efficient vehicles.
Beware of DIY Estate Planning Pitfalls
Many people attempt to manage their IHT exposure through DIY planning, such as gifting money to family members. However, without professional advice, they risk falling into common traps, such as:
- Failing to account for the seven-year rule on gifts.
- Accidentally triggering capital gains tax (CGT) liabilities.
- Misunderstanding how trusts work and facing unexpected tax charges.
Seeking guidance from a holistic financial planner can help you avoid these mistakes and ensure your wealth is passed on efficiently.
The Financial Life Coach Approach: A Transparent, Empowering Strategy
At The Financial Life Coach (FLC), part of the Academy of Life Planning, we take a unique approach to financial planning. We believe in providing transparent, cost-effective solutions that empower you to take control of your finances.
Our Services:
- Self-Directed Planning: Use our HapNav tool to navigate your financial journey independently.
- Collaborative Planning: Work with us to create a tailored strategy that fits your needs.
- Cashflow Modelling: Leverage advanced tools like Voyant for in-depth scenario planning.
- Estate and IHT Planning: Reduce your tax burden through smart strategies that preserve your legacy.
Why Choose Us?
Unlike traditional financial advisers, we focus on plans, not products. We provide clear, jargon-free guidance, ensuring you have full control over your financial future.
Take Action Today
Inheritance tax is not just an issue for the wealthy. With rising property prices, pension reforms, and frozen thresholds, more families than ever are at risk of a hefty tax bill. But with the right planning, you can take control of your estate and ensure your hard-earned wealth benefits your loved ones—not the taxman.
Book a consultation today to explore how we can help you navigate the complexities of IHT and secure your financial legacy. Let’s build a strategy that works for you—one that’s transparent, effective, and aligned with your life’s goals.
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