The proportion of UK deaths subject to inheritance tax (IHT) is expected to nearly double by the end of the decade, according to projections by the Office for Budget Responsibility (OBR).
Forecasts indicate that by 2029/30, 9.5% of all deaths—up from 5.1% in 2022/23—will incur IHT, meaning around 66,600 estates annually will be subject to the tax.
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This represents an increase of over 30,000 cases each year, highlighting a trend that could create substantial demand for financial advisers.
The rise is attributed to recent government reforms, including frozen thresholds and changes to the IHT regime that broaden its scope.
The Chancellor stated in the recent Budget that the Nil Rate Band and Residence Nil Rate Band, which exempt certain asset values from IHT, will remain frozen until 2029/30.
Additional reforms affecting Business Relief, Agricultural Property Relief, and pension death benefits are also expected to expand the number of estates caught in the IHT net.
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By GlobalDataFurthermore, updates to the rules for Resident Non-Doms (RNDs) could make more non-UK assets subject to IHT after prolonged residency, tightening regulations around those who qualify as UK residents.
Utmost Wealth Solutions, a prominent supplier of insurance-based wealth solutions, claims that as more and more estates are caught in the IHT net over the next years, the reforms present a “growing opportunity” for intermediaries to assist clients in effectively managing their estates.
Marc Acheson, Global Wealth Specialist at Utmost Wealth Solutions said: “Inheritance tax is often badged as one of the UK’s most unpopular taxes but can be perceived as ‘voluntary’ in that there are steps that can be taken to reduce its impact.
“The reforms announced by the Chancellor will create a growing opportunity for advisers as more and more individuals seek help in navigating the new rules with the OBR estimating that, by the end of the decade, twice as many people will be impacted by IHT every year.
“In the short-term, we expect to see a surge in demand from individuals looking to re-engage advisers and reconsider their plans. The clampdown on the number of assets exempt from IHT will see strategies shift to lifetime gifting earlier and more often to individuals or trusts as well as spending pension pots.
“The Budget is also likely to increase interest in insurance policies and death benefits that can protect individuals against IHT liabilities while unit linked life assurance could help advisers defer tax for their clients until a chargeable event occurs.”
As the tax landscape shifts, many expect wealth transfer strategies to become increasingly essential, especially for those wishing to preserve family wealth and minimise tax burdens.
