Shaping your future with wealth management

We recently held the latest in our series of Wealth Management Seminars and if you missed the opportunity to come along, you can find the recordings within this article.

We were delighted to be joined by the knowledgeable Rupert Toovey from Toovey’s Antique and Fine Art Auctioneers who spoke about chattels and the significant assets that could be hiding within your estate. Watch here.

Lee Hayward from Kreston Reeves Financial Planning covered off retirement planning and the ways in which your income can be structured in retirement. Watch here.

Gemma Spencer from our legal services team spoke about Wills, Powers of Attorneys and Trusts and how these can be used to manage the future and give you peace of mind. Watch here.

Private Client Tax Director Jo White finished off the seminar with an update on Inheritance Tax planning opportunities. Watch here.

So why the need for proactive wealth management?

According to the Government’s own figures, in 2018/19, the last year for which there is published data, HMRC collected £4.63bn in Inheritance Tax on death.  The average amount payable by those estates subject to Inheritance Tax was £209,000 and each person has an Inheritance Tax-free amount, the Nil Rate Band, which is currently £325,000. This has been the same since April 2009 and is expected to stay the same until April 2026.

By way of comparison, if you had invested £325,000 into a FTSE100 tracker portfolio in April 2009 it could now be worth approximately £585,000 – an increase of around 80%. Ignoring any other assets, this would result in an Inheritance Tax liability of £104,000 when in April 2009 there would have been no liability.

Or perhaps you bought a house in Horsham for £325,000 in April 2009.  According to the Nationwide House Price Index it could now be worth approximately £649,000, almost doubling in value of that period.  Ignoring any other assets, this would result in an Inheritance Tax liability of more than £129,500 when in April 2009 there would have been no liability.

This fiscal drag when tax allowances are not keeping up with the increases in asset values means more estates are now subject to Inheritance Tax and on average, the amount of tax payable by each estate is increasing.

This has partly been offset by the Residence Nil Rate Band, but this is not available to everyone, and can only be used against the value of certain assets. As well as more estates being subject to Inheritance Tax, we also have the potential for changes to the Inheritance Tax rules with a new Chancellor this autumn.

These changes could include:

• Extending the time before death that gifts must be made for them to be exempt from tax – perhaps from the current 7 years to 10 years
• Changing the rules relating to Business Property Relief and aligning these with the requirements for Capital Gains Tax Business Asset Disposal Relief, which would make it more difficult to qualify for the relief
• Aligning Capital Gains Tax rates with Income Tax rates which could make it more expensive to transfer assets

It is very unlikely that any changes made would be retrospective, so making transfers under today’s rules could mean that you are not affected by future tax changes.

It has also been a challenging time for stock market values since the beginning of the year.  Depressed equity values could also make this a good time to consider transferring assets.  This could reduce any Capital Gains Tax that might be payable, and all future increases in value could be outside of your estates.

With careful planning your potential Inheritance Tax exposure can potentially be reduced significantly, ensuring that your chosen beneficiaries receive more post-tax value.

The key thing to remember when undertaking any planning is to ensure that it is tailored to your specific circumstances and what you are looking to achieve and takes account of your current and future requirements.