In his latest column for Altrincham Today, Jason Moss, an Altrincham-based Independent Financial Adviser (IFA) at Harvest Associates, explores the complex and emotionally charged world of inheritance tax.
Inheritance tax remains one of Britain's most unpopular taxes, arriving at the most emotionally challenging times following the loss of a loved one.
Determining whether your estate faces inheritance tax liability is complex - and often secondary to the more pressing question of whether your current wealth can sustain your spending needs throughout retirement.
We model our clients' existing circumstances and project them forward across their lifetimes to understand whether they can afford to live as they wish to. This analysis provides invaluable peace of mind by offering clear insights into the affordability of their financial future whilst revealing potential inheritance tax liabilities.
The outcomes can give clients the opportunity to make decisions now (when combined with financial advice) to help them mitigate their future inheritance tax liabilities. For many, this means gifting to children and grandchildren during their lifetime rather than through their wills. Given today's soaring living costs and housing prices, such early gifting can dramatically improve family situations, resulting in some really positive emotions as clients get to see their legacy playing out during their lifetimes.
The Gifting Dilemma
However, gifting isn't suitable for everyone. As former Chancellor Roy Jenkins memorably observed: "Inheritance tax is a voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue."
Whether you share this sentiment is down to you, but what's certain is that more estates will face inheritance tax from April 2027 if the government’s proposed legislation brings pensions into the tax remit.
The Spending Shift
These impending changes are prompting many to consider drawing more heavily from their lifetime savings - pensions, cash and investments - rather than leaving them to be heavily taxed upon death.
The shift from accumulation to decumulation represents one of retirement's greatest mindset shifts. The proposed pension changes add further complexity to this transition. As one client recently told us: "We are encouraged to save all our lives and now I feel that we are being forced to spend it.”
As part of a clients' financial advice journey, we will help clients understand whether they have an inheritance tax liability or not, and if so how to mitigate using various strategies that could be suitable. Get in touch if you would like help in what is an ever increasingly complex advice space.
To contact Jason or for more information, email jmoss@harvestassociates.co.uk, call 07703 341 285 or visit harvestassociates.co.uk.
Harvest Associates is authorised and regulated by the Financial Conduct Authority. FCA registered number is 629749. The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.
