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More than 70% of Brits think Inheritance Tax (IHT) is unfair, according to a poll carried out by Tax Policy Associates in 2023. You might consider how other countries handle taxing assets when you pass away to be “fairer”, read on to find out more.

Over the last few months, you’ve read about how IHT works in the UK and some of the steps you may take to reduce a potential bill.

In the UK, IHT is a type of tax that’s levied on the estate of someone who has passed away if the total value exceeds certain thresholds. The portion of estates above the threshold may be liable for IHT at a standard rate of 40% in 2024/25.

Many countries have some form of IHT. Indeed, according to euronews, 19 countries in the EU levy some form of tax on inheritances, gifts, or estates.

So, how does the UK differ in the way that it taxes estates? Read on to discover how other countries tax assets after you’ve passed away.

Several countries have no form of Inheritance Tax

While many countries do levy a tax when passing on assets, there are a few that don’t have any form of IHT. For example, Austria abolished IHT in 2008, and Norway followed suit in 2014.

In the UK, modern IHT tax dates back to 1894 when an estate duty was introduced. However, there were different types of IHT going much further back. While there have been calls to abolish IHT in the UK, it’s not a step Conservative or Labour governments have taken so far.

The threshold for paying Inheritance Tax varies significantly between countries

Among countries that have IHT, the majority of estates fall under tax thresholds and aren’t liable.

As a result, taxes on estates typically make up a small proportion of total tax revenues. In fact, the Financial Times reports only four of the 38 countries that are part of the Organisation for Economic Co-operation and Development (OECD) derive more than 1% of their total tax revenue from inheritances, estates, or gifts – Belgium, France, Japan, and South Korea.

The threshold for paying IHT varies significantly. In the UK, in 2024/25, the nil-rate band is £325,000. If the value of your estate is above this figure, IHT might be due.

In contrast, a Belgium citizen might need to consider an IHT bill if the value of their estate is more than just €12,500 (£10,505) depending on the region they live and who their beneficiaries are.

On the other end of the scale, in the US, federal estate tax is only required if the value of the estate exceeds $13.61 million (£10.25 million), and only six states levy additional IHT.

Many countries tax the recipient rather than the estate

The UK is an outlier in how it taxes the assets of the deceased. The UK is one of a small number of countries that tax the estate and consider the total value, not how the assets will be distributed. Denmark and the US also take a similar approach.

In many other countries, rather than taxing the estate, the recipient is taxed. So, an IHT bill would consider the gains each recipient has made and their personal circumstances.

In a 2023 report, the Institute for Fiscal Studies stated that taxing recipients and considering their wealth would be “the most appropriate way of taxing inheritances”, if IHT aims to reduce the effect of inherited wealth on inequalities. It notes this would allow a “transfer of £500,000 to a millionaire to be taxed differently from a transfer of £500,000 from the same estate to someone who is poor”.

The majority of countries favour a progressive Inheritance Tax rate

Again, the UK is an outlier by having a flat rate of IHT. In 2024/25, the portion of your estate that is liable for IHT would be taxed at a standard rate of 40% in most cases.

In contrast, many other countries favour a progressive tax – where the tax rate is increased for estates that have a higher value. For example, in Denmark the IHT rate is between 15% and 25%, and in Belgium, it could range from 3% to as high as 80%.

Many other taxes in the UK are progressive. For instance, you may pay a higher rate of Income Tax on the proportion of your income that exceeds the higher- or additional-rate thresholds. So, making IHT progressive could align it with other taxes.

Contact us to talk about Inheritance Tax

If you’d like to talk about your estate’s potential IHT liability and the steps you could take to reduce the potential bill, please contact us.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate Inheritance Tax planning.

Did you know that a survey found that the UK consumed the equivalent of 1.77 billion bottles of wine in 2020?

Whether you’re a wine connoisseur or are looking to improve your knowledge by visiting a region known for its exquisite wines, these incredible destinations in Europe could be perfect for you.

From the delicious amber wines of Kakheti, Georgia to the brilliant wine festivals of Plovdiv, Bulgaria, read on to discover the top five weekend getaways for wine connoisseurs.

1. Kakheti, Georgia

Georgia is often referred to as the “birthplace of wine”, thanks to its long winemaking history spanning over 8,000 years.

Kakheti is the country’s main wine-producing region. The warm climate on the eastern side of Georgia is home to their iconic native grapes, the dark red saperavi and the unique white rkatsiteli.

The region is also famous for its popular amber wines. These are made from their delicious local white grapes, which are fermented in contact with their skins and stems in a clay amphorae called “qvevri”.

The process is a UNESCO world heritage-listed tradition and is what gives these amazing wines their distinct complex profile and famous colour. On your visit, be sure to keep an eye out for the wineries who are happy to let you observe this ancient technique.

Kakheti is only an hour from Georgia’s capital city, Tbilisi. In between exploring their beautiful vineyards and enjoying the local wine, you can also visit their historic monasteries and the picturesque Tusheti National Park.

2. Setúbal, Portugal

Portugal has grown in popularity over the past few years, which means their previously underrated wines – from regions such as the Alentejo, the Douro Valley, and Vinho Verde – are starting to get the appreciation they deserve.

However, there are still some wine regions flying under the radar that you can explore.

The Setúbal Peninsula is only a 30-minute drive from Lisbon and is known for its fortified wines made with moscatel grapes. The picturesque coastal region also produces amazing dry wines, including aromatic whites made from these local grapes and bold reds from the native castelão.

Beyond tasting their delicious wines or visiting the local wineries, such as Quinta do Piloto, you can also relax on sunny beaches, enjoy delicious seafood specialities, and tour the gorgeous Castelo de Palmela.

3. Bordeaux, France

A holiday to Bordeaux has become a rite of passage for wine lovers thanks to its iconic winemaking history.

Bordeaux had already started to earn fame for its wines as far back as the first century AD when the Romans first started to plant vineyards and produce wine, and it remains one of the most popular destinations for wine tourists today.

The two most popular grapes from the area remain the cabernet sauvignon and merlot, but Bordeaux is also home to the world’s finest white wines.

For example, Chateau d’Yquem produces high-quality sweet wines from their sauternes and barsac grapes, which are exported all over the world.

Between exploring the famous Chateaus and stunning vineyards, you can also soak up the rich history of the area by exploring the ruins scattered over the region as well as enjoying a gentle cruise down the river.

4. Edinburgh, Scotland

If you fancy a staycation, why not spend a weekend exploring the incredible city of Edinburgh?

Although Scotland isn’t the ideal place to grow the grapes that make your wine, it does have a rich history of creating and distributing wine and other spirits.

Cockburns of Leith is Scotland’s oldest wine and spirits merchant. Founded in 1796, they have bottled and shipped wine and spirits across the UK and the world for over two centuries, and continue to do so today. You can visit their shop or book a wine tasting session to explore their wide variety of delicious wines.

If you’re looking for something more modern, there are also plenty of wine bars for you to explore across Edinburgh.

For naturally made wines, visit Spry for their delicious small plates, knowledgeable staff, and constantly revolving wine list. Or, if you fancy some Scottish tapas alongside your wine, enjoy a delicious experience in The Bon Vivant.

5. Plovdiv, Bulgaria

The valley of the Maritsa River is where the best winemakers grew their grape varieties 5,000 years ago, and still do to this day.

Plovdiv is a favourite destination for people searching for mouth-watering cuisine to go with their wine. Whether you choose to indulge in their gourmet cuisine or homestyle food, you can rest assured that your meal will be completely authentic and accompanied by a large wine list from the biggest wine region in Bulgaria.

Bulgaria is most famous for its ancient wine varieties. The dimyat grape produces a well-structured white wine with a sweet edge, while their mavrud grape – indigenous to the Thracian Valley – produces a spicy, full-bodied wine.

Plovdiv boasts a beautiful Old Town and a fascinating Kapana Creative District, filled with incredible restaurants and shops for you to explore. The city is also gaining popularity for its culinary festivals.

Whether you visit during The Wine and Gourmet Festival in May or The Young Wine Festival in November, you know you’ll get to experience delicious local food and drink.

There’s an abundance of unregulated financial advice available, and research suggests it could harm your security and long-term plans. Whether you receive advice through social media or follow the financial decisions of friends, you could take more risk than is appropriate or miss out on opportunities.

Read on to discover some of the potential perils of taking unregulated financial advice.

Almost 14% of Brits use social media for financial guidance

Social media has become an important part of daily life for many. Indeed, it’s estimated that in 2022, 4.59 billion people used social media worldwide. So, it’s perhaps unsurprising that a growing number of people are seeking financial advice on social media platforms.

According to a study from Capital One, 13.7% of Brits use social media as a primary resource for financial guidance. Interestingly, men were twice as likely to use social media platforms when seeking financial advice.

While social media can be informative and may contain advice from experts, the research suggests it may be more likely to harm your wealth.

In fact, almost three-quarters (74%) of people who have taken financial guidance from social media lost money or experienced an “undesired outcome”, such as harming their credit score.

Social media isn’t the only place you’ll come across unregulated financial advice either. You might also speak to friends and family, hear advice in the media, or read blogs that offer guidance. So, it can be difficult to avoid unregulated advice, but recognising when it could harm your finances may be important.

4 reasons you may choose to avoid unregulated financial advice

1. You might not know whether they’re qualified or experienced

The Capital One research found that 30% of survey participants said qualifications were a sign of trustworthiness.

The Financial Conduct Authority (FCA) requires all regulated financial advisers to have the relevant qualifications. This means you can rest assured that your finances are in safe hands.

If you choose to take advice from social media or other unregulated sources, it can be difficult to assess the qualifications and experience that the person has. Indeed, the Capital One research found that 80% of financial content on YouTube was made by someone with no qualifications.

2. You’re not protected if something goes wrong

Taking regulated financial advice means you could be protected by the FCA if something goes wrong. All regulated financial advisers will have internal complaints handling procedures and, if you need to, you can approach the regulator.

In contrast, if you’ve taken unregulated financial advice, it might be difficult to hold the individual or firm accountable or get justice if you encounter a problem. For example, you might not receive compensation if you were given inappropriate advice or mis-sold an investment.

3. The advice may not be tailored to you

Watching a quick social media video might seem like a simple way to receive financial advice, but it’s important to note it hasn’t been tailored to you. As needs and goals can vary hugely between people, a one-size-fits-all approach could lead to some acting on advice that isn’t right for them.

Similarly, a well-meaning family member might offer investment advice that suits their needs, but that doesn’t mean it’s the right solution for you. A host of factors might affect your investment decisions, from your investment time frame to the other assets you hold.

Despite this, almost 20% of people told Capital One that their friends and family are their primary source of financial information.

Working with a regulated financial adviser means you have an opportunity to talk about your aspirations, concerns and wider finances to create a plan that’s tailored to you.

4. You could increase the risk of falling victim to a scam

It can be difficult to check the credentials of online personas. So, if you’re taking advice from online sources, you could be more likely to be targeted by a scammer.

The Annual Fraud Report 2024 from UK Finance also notes that scammers are increasingly using social media to connect with victims and gather information. For example, the report states that adverts on social media are “used heavily in investment scams”.

When seeking financial advice, you can use the FCA’s Financial Services Register to find the details of legitimate, regulated firms.

Contact us to talk about your finances

As regulated financial advisers, you can have confidence in the guidance we provide. If you’d like to talk about your financial plan, please get in touch.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Effectively managing your finances to get the most out of your assets often means going beyond paying into a pension regularly or selecting a fund to invest through. That’s why lifestyle financial planning could help you better align your finances with the life you want to lead now and in the future.

Financial advice alone might help you understand the benefits of investing money and which opportunities may suit your financial risk profile. While this is useful, it doesn’t consider how investing could support your lifestyle goals. Lifestyle financial planning could help you bridge the gap between your finances and aspirations.

Read on to find out more.

A lifestyle financial planning conversation starts with your goals

While you might expect a financial plan to start delving into the numbers straightaway, lifestyle financial planning is as much about your goals as your assets.

So, often conversations will start with what you aspire to in the short and long term. This approach means you can start to understand why you’ve set money goals. While you might have a target for your savings, what you want to do with the money is often what drives you to diligently add to the account every month.

For example, when building a nest egg, you might be:

Planning to use it to retire early
Improving your financial security by creating a safety net
Dreaming about a once-in-a-lifetime cruise you want to take
Putting money aside to help your children or grandchildren get on the property ladder.

Not only could your goals give your financial plan a direction, but it may provide useful motivation too.

Putting money aside for a retirement that is still a decade away might feel tedious, especially if there are experiences you’d like now. Yet, if you’re looking forward to a retirement that allows you to travel more or indulge in hobbies, you might be less likely to cut your contributions.

Having a clear idea about what you’re working towards may mean you find it easier to make sacrifices now. Yet, according to an Aegon report, just 1 in 4 people have a concrete vision of the things and experiences their future self might want.

So, as part of creating a lifestyle financial plan, you might want to dedicate some time to thinking about what your goals are.

In addition to goals, you may also want to consider what you’re worried about. For example, when you consider your future, you might be concerned about how:

To pay for care costs if needed
Inflation might affect your retirement income
Your partner would cope financially if you passed away first
To pass on your wealth tax-efficiently during your lifetime or when you pass away.

Speaking about your worries as part of your financial plan might help you identify ways to put your mind at ease. For instance, if you’re worried about how the cost of care could affect your wealth and loved ones, you may decide to set money aside to cover a potential bill.

Your lifestyle goals are at the centre of your financial plan

Once your priorities are set out, it’s time to start thinking about the numbers – are your goals realistic and what steps might you need to take to reach them?

Starting with your goals means you can focus on how to use your wealth to live the life you want rather than simply looking at how to grow your assets.

Take retirement, for example. You might calculate that if you work until you’re 65, you can use your pension to create an income of £45,000 a year. But, if retiring early is what you really want, and you can retire at 55 with a lower, but still comfortable income, you might decide that building more pension wealth isn’t the right option for you.

Lifestyle financial planning could help put your wealth into perspective and allow you to see how it might be used to turn aspirations into reality.

Regular reviews could help ensure your lifestyle financial plan continues to align with your goals

During your lifetime, you’re likely to encounter obstacles, be presented with opportunities, or simply change your mind.

Your lifestyle financial plan isn’t static; it can evolve to suit your needs. Regular meetings are a vital part of ensuring your finances continue to reflect both your circumstances and aspirations.

For instance, seeing your grandchildren struggle to get on the property ladder might mean you’re keen to pass on wealth during your lifetime. If you’d previously planned to pass on wealth through an inheritance, you may benefit from reviewing how gifting could affect your wealth now and in the long term.

Knowing that you have someone to discuss your changing wishes with could give you the confidence to pursue new goals.

In the above example, calculating if you’d still have a financially comfortable retirement after providing grandchildren with a property deposit could offer you peace of mind.

Contact us to create your lifestyle financial plan

If you want to create a financial plan that considers the lifestyle you want to achieve, please contact us. We’ll help you understand the steps you may be able to take to turn your dreams into a reality.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

August was a rollercoaster month for investors, with the global stock market experiencing significant volatility. Read on to find out what may have affected your investments.

Many market indices saw sharp falls early in August sparked by fears that the US is on track for a recession. However, investors are likely to have experienced some recovery in the weeks that followed.

On 16 August, global stock markets boasted the best week of 2024 – the MSCI main index of world stocks was up 3.5% over the week.

UK

There was positive news from the Office for National Statistics, which reported the UK economy grew by 0.6% in the second quarter of 2024. The figure lent further weight to claims that the UK is leaving the shallow recession at the end of 2023 behind.

However, the data showed that GDP per head is 0.1% lower in real terms than it was in the second quarter of 2023. This measure is often used as a broad barometer for living standards and economic wellbeing.

Despite this, the UK is set to be the third-fastest growing economy in the G7, behind only Japan and the US.

The Bank of England (BoE) also had an optimistic outlook. The Bank more than doubled its growth forecast for 2024 to 1.25%. It also decided at the start of August to cut the base interest rate for the first time since the pandemic to 5%.

Official data shows inflation increased to 2.2% in the 12 months to July 2024. It’s the first time inflation has increased since December 2023, but it wasn’t as sharp as some economists were expecting.

With chancellor Rachel Reeves set to deliver her first Budget on 30 October 2024, news that public borrowing soared could place pressure on her plans.

Public borrowing hit £3.1 billion in July 2024 – £1.8 billion more than in July 2023. Worryingly, the Office for Budget Responsibility previously estimated the government would only need to borrow £100 million. The news led to speculation that taxes will be hiked and spending plans cut to plug the black hole.

Like many other markets, the UK experienced volatility at the start of August. On 5 August, the FTSE 100 – an index of the 100 largest companies listed on the London Stock Exchange – fell by 2%. It did start to recover the following day with a modest 0.23% rise.

There was good news for Rolls-Royce shareholders this month. The company announced it would pay dividends for the first time since the pandemic, as underlying profit is expected to be higher than previously estimated thanks to a turnaround plan. The announcement led to shares rising by almost 10%.

Interestingly, the High Pay Centre found that FTSE 100 chief executive pay reached a record high. The median pay in 2023 was £4.19 million. For the second year, AstraZeneca chief executive Pascal Soriot topped the list with pay of £16.85 million.

Europe

The S&P Purchasing Managers’ Index (PMI) for the eurozone indicates the bloc is growing. However, Dr Cyrus de la Rubia, the chief economist at Hamburg Commercial Bank, warned it was at a “snail’s pace”.

Rubia also noted that the eurozone has benefited from several large events so far this year, including the European Football Championship in Germany, the Paris Olympics, and Taylor Swift concerts. So, a slowdown could be experienced in the coming months.

Eurostat data shows unemployment increased to 6.5% in June 2024. Rising unemployment could signal that businesses aren’t confident about the future.

Similar to the UK, European stock markets experienced volatility early in August. The Stoxx Europe 600 index tumbled 2.2% on 5 August but moved back into the red the following day.

US

US job data sparked market volatility when figures from the Bureau of Labor showed unemployment increased to 4.3% in July 2023 and only 114,000 new jobs were created – far fewer than the 175,000 economists had anticipated. Coupled with poor earnings from some key technology businesses, stock markets fell.

On 2 August, technology-focused index Nasdaq fell by around 10% from its peak amid concerns that the US may enter a recession by the end of this year. Indeed, JP Morgan believes there’s a 1 in 3 chance the US will fall into a recession in 2024.

When markets reopened on 5 August, they sunk deeper into the red, with the Dow Jones falling by 2.8%, the S&P 500 tumbling by 4.2%, and the Nasdaq declining by 6.2%.

When Wall Street started to rally on 7 August, it was technology stocks that led the way. Salesforce saw its stocks rise by 3%, while Amazon (2.5%), Apple (2.27%) and Microsoft (2.2%) all gained too. The rally wasn’t universal though – Airbnb’s shares dropped by 14% as demand fell in the US and it missed profit expectations for the second quarter of 2024.

While gains were made, the Guardian reported that an estimated $6.4 trillion (£4.88 trillion) was erased from global stock markets in the three weeks to 7 August. Goldman Sachs also warned that the stock market correction hadn’t gone far enough.

There was some good news when PMI data indicated the service sector had increased “markedly” in July 2024, which could ease some concerns about an impending recession.

Asia

US recession fears were felt around the world.

Japan’s Nikkei index fell by 5.8% on 2 August and then suffered its worst day since 1987 on 5 August when it closed more than 12% down, while the broader Topix index experienced a similar fall. The indices bounced back, with the Nikkei’s value rising by more than 10% a day later.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The study of how psychology affects financial behaviours is fascinating. Understanding the basics could improve your relationship with money and how it influences your financial decisions.

Behavioural finance looks at how psychological influences and biases affect the behaviour of investors. It aims to understand why people make certain financial choices and the effect it could have on returns.

The study argues that investors don’t always behave rationally or have self-control. Instead, your mental state and biases play a role in your decision-making.

As well as the effect it has on an individual’s wealth, behavioural finance notes that it could explain market anomalies, such as a sharp rise or fall in the value of a particular stock or even an index.

For example, one behavioural financial concept is the “emotional gap”.

The emotional gap refers to decisions based on extreme emotions. You might read a headline about how a company’s value is going to “plummet” in the newspaper. If you hold stocks with that company, it’s normal to fear or worry about what that could mean for your finances. These emotions might prompt you to sell the stock to avoid the perceived potential losses, even if that decision doesn’t align with your long-term financial plan.

If a large group of people read the same headline and also experienced fear, it could lead to the price of that company’s stock falling, even if its intrinsic value hasn’t changed.

So, how could improving your understanding of behavioural finance help you?

Awareness of behavioural finance may help you keep your emotions in check

It’s normal for your experiences to affect your emotions and decisions. Yet, when you’re investing, it could lead to you making decisions that don’t align with your goals and potentially harm your long-term plans.

Deciding to withdraw investments because you’re worried the value will fall might lead to lost returns when you look at the bigger picture.

It’s not just negative emotions that could influence your investment decisions either. You might also feel excited about an investment opportunity after you’ve read about it in the newspaper, so you proceed without fully assessing the risks or if it’s right for you.

According to an FTAdviser report, 61% of investors who take financial advice worry about short-term market movements. A similar proportion also regularly made decisions or proposals based on these concerns that “surprised” their adviser.

Being aware of financial bias could mean you’re able to keep your emotions in check.

Recognising bias could put you in a better position to evaluate information

Emotions are an important part of behavioural finance, and so is understanding how you evaluate information.

For example, anchoring is a type of bias where your view is anchored to a particular piece of data. You might hold on to this information, even if it becomes irrelevant or separate data offers a different view.

Let’s say you first see a stock listed for £50. You might become fixated on this price regardless of other factors that may affect its value when you’re deciding how to manage the investment.

Once again, these types of bias could lead to decisions that aren’t right for you.

Understanding investor behaviour could help you feel more confident about market movements

As an investor, it can be challenging to keep your nerves in check when the market is experiencing volatility. Understanding what might be driving this could help to put your mind at ease.

The market moving up and down is part of investing. Numerous factors affect the value of the market and short-term movements are normal. Yet, when you see values fall, it can still be nerve-wracking. It can make it tempting to try and time the market to minimise losses.

However, as investors, and as a result the market, can act irrationally, timing the market consistently is impossible. Rather than reducing potential losses, it could mean you miss out on returns overall. Recognising this may help you feel more confident during periods of volatility so you’re more likely to stick to your long-term investment strategy.

Historical data shows that, despite short-term movements, the long-term trend of markets is an upward one. Even after periods of recession or downturns, the market has recovered when you look at returns over years rather than days or months.

It’s important to keep in mind that investment returns cannot be guaranteed and there is a risk. However, for most investors, taking a long-term approach makes financial sense.

Working with a financial planner could reduce the effect of emotions and bias

Recognising when your emotions or biases are influencing your financial decisions can be difficult. Working with a financial planner means you have someone to turn to when creating your financial plan if you’re thinking about making changes. With the benefit of a different perspective, you can identify when you might be responding to emotions or bias in a way that might harm your long-term goals.

If you’d like to talk to us about your financial plan, please contact us.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

If you take a proactive approach to managing your wealth, you could reduce how much Inheritance Tax (IHT) your estate may be liable for when you pass away.

Last month, you read about what IHT is and when estates become liable to pay it. Now, read on to discover some of the shrewd strategies you could use to reduce a potential IHT bill.

Around 1 in 22 estates are liable for Inheritance Tax

The latest HMRC figures show that around 1 in 22 estates are liable for IHT. In fact, in 2021/22, 4.39% of deaths resulted in an IHT charge. However, frozen IHT thresholds mean the portion of estates liable for IHT is slowly rising.

While only a small proportion of estates face an IHT bill, the standard IHT rate of 40% means it can lead to a sizeable amount going to HMRC rather than your beneficiaries. Indeed, according to the Office for Budget Responsibility, HMRC collected £7.1 billion through IHT in 2022/23. The organisation expects the figure to reach £9.7 billion in 2028/29.

So, if your estate could exceed the nil-rate band, which is £325,000 in 2024/25, you might want to consider these steps to reduce a potential IHT bill.

1. Write or review your will

A will is one of the key steps you can take to ensure your assets are distributed according to your wishes. Your will can also be used to manage IHT liability by distributing your assets in a way that allows you to use allowances.

For example, the residence nil-rate band could increase how much you’re able to pass on tax-efficiently if you leave your main home to children or grandchildren. In 2024/25, the residence nil-rate band is £175,000, so it could significantly boost the amount you’re able to pass on before your estate needs to pay IHT.

Yet, according to a FTAdviser report, a third of adults aged 55 or over have not made a will.

If you already have a will in place, reviewing it may be worthwhile. You might find opportunities to reduce your estate’s IHT liability or that your wishes have changed.

It’s often a good idea to check your will every five years or following major life events, such as getting married, welcoming children, or relationships breaking down.

2. Gift assets during your lifetime

Giving away some of your wealth during your lifetime might bring the value of your estate under IHT thresholds or reduce the overall bill. It could also be useful for your loved ones, who may benefit more from financial support now compared to later in life.

Some gifts may be considered immediately outside of your estate for IHT purposes, including:

Up to £3,000 in 2024/25 known as the “annual exemption”
Small gifts of up to £250 to each person, so long as they have not benefited from another allowance
Wedding gifts of up to £1,000, rising to £2,500 for your grandchildren or great-grandchildren and £5,000 for your child
Regular gifts that you make from your income that do not affect your ability to meet your usual living costs. For example, you might pay rent for your child or contribute to the savings account of your grandchild. It’s important these gifts are regular and it’s often a good idea to keep a record of them.

However, other gifts may be known as a “potentially exempt transfer” (PET) and could be included in IHT calculations for up to seven years after they were received.

You might also need to consider how gifting could affect your long-term financial security.

If you want to gift assets to your loved ones during your lifetime, making it part of your financial plan could offer peace of mind. We may be able to help you understand how gifting will affect your wealth in the future and how to do so tax-efficiently.

3. Use your pension to pass on wealth

For IHT purposes, your pension usually sits outside your estate. As a result, it might provide a valuable way to pass on assets. According to a PensionBee survey, almost two-thirds of Brits were unaware of this, so your pension might be an option you’ve overlooked when considering IHT.

Choosing to use other assets to fund your retirement could help you pass on more to your loved ones through your pension. Considering your beneficiaries when you’re creating a retirement plan could help you decide which option is right for your goals.

While pensions aren’t normally liable for IHT, your beneficiary may need to consider Income Tax when accessing funds held in an inherited pension in some circumstances.

Your pension isn’t typically covered by your will. Instead, you can complete an expression of wish form to inform your pension provider who you’d like to receive it when you pass away.

4. Place assets in a trust

Provided certain conditions are met, assets that are placed in trust no longer belong to you. So, they normally won’t be included when calculating an IHT bill.

A trust is a legal arrangement that holds assets for the benefit of another person. As the benefactor, you can set out who will benefit from the assets and under what circumstances, which can give you greater control when compared to gifting or leaving an inheritance. In some cases, you may still benefit from the assets held in a trust, such as receiving the dividends from investments.

You can also name a trustee, who would be responsible for managing the trust in line with your wishes and for the benefit of the beneficiaries.

There are several different types of trusts and it’s important it’s set up correctly to ensure it meets your needs, including reducing a potential IHT bill if that’s one of your priorities. Taking legal advice might be valuable when creating a trust.

In addition, it may be difficult, and sometimes impossible, to reverse decisions related to a trust. As a result, you should think carefully about which assets you place in a trust and how your decisions align with your wider financial plan. Please arrange a meeting with us if you’d like to talk about putting some of your wealth into a trust.

5. Take out life insurance

Life insurance isn’t a way to reduce your estate’s IHT liability. However, it could provide a useful way for your family to pay the bill.

Whole of life insurance cover would pay out a lump sum to your beneficiaries when you pass away. They could then use this payout to cover the IHT bill, so they wouldn’t need to consider how to use their inheritance to pay the cost. This option might ease the stress your loved ones are dealing with at a time when they’re grieving or handling your affairs.

It’s important to note that you’ll need to pay regular premiums to maintain life insurance coverage. The cost of life insurance can vary depending on a range of factors, from the size of the eventual payout to your health.

You might want to consider using a trust to hold the life insurance. Otherwise, the payout could be added to the value of your estate and increase the IHT that is due.

Legal advice may be useful when setting up a trust, which can be complex.

Contact us to talk about your Inheritance Tax strategy

There might be other ways you could reduce a potential IHT bill too. If you have any questions about IHT or your wider financial plan, please contact us.

Next month, read our blog to discover how IHT in the UK compares to other countries and proposals to reform the tax.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning, trusts or Inheritance Tax planning.

Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

It doesn’t matter how much you prepare; sometimes unexpected life events could mean your carefully laid plans go awry. While you can’t know what’s around the corner, you can change how you respond to unpredictable events to help keep your financial plan on track.

A life event could have a huge impact on your wealth, both now and in the future. Circumstances outside of your control might even lead to you changing your long-term goals. So, even if you already have a robust financial plan in place, a review following major life events could be helpful.

Here are four unpredictable life events you might have experienced that could mean you’d benefit from updating your financial plan.

1. Experiencing redundancy

Redundancy could have a huge effect on both your short- and long-term finances.

In the short term, you might need to dip into savings or other assets to cover your essential outgoings. As you may stop contributions towards your long-term goals, such as adding to your pension for retirement, it could also mean you face an unexpected shortfall in the future.

You might also receive a redundancy payout, which you want to understand how to use to improve your financial security.

According to data from the Office for National Statistics, around 3.4 employees in every 1,000 were made redundant between March and May 2024. A separate poll from SurveyMonkey also found that 58% of employees feel uncertain about their future job security.

If you’ve been made redundant, a financial review could help you identify ways to manage your finances while you search for employment, and then assess the potential long-term impact.

2. Taking time off work due to an accident or illness

Needing to take a long time off work due to an accident or illness could leave you in a financially vulnerable position. Much like redundancy, it could affect both short- and long-term finances.

You might think the chances of you being unable to work for an extended period are slim. However, figures released at the start of 2024 and published in the Guardian, highlight how many people are affected by unexpected illnesses. According to the data, 2.8 million people were not working due to long-term sickness at the start of the year.

If you’re unable to work, a financial review could help you assess how to use your assets to create a regular income to cover essential outgoings. It might also consider how you could keep long-term goals on track.

3. Separating from your partner

Whether you’re married or not, separating from your partner may have large implications for your financial security. Separating when your finances are intertwined could have a substantial impact on your household income, regular expenses, and even long-term wealth creation.

Indeed, research led by the University of Bristol found that equal division of joint assets, including property and pensions, was not the norm during divorce. It only occurred in around 3 in 10 cases. This means that one person was likely to miss out financially.

Working with us to assess your financial plan following a separation could help you understand how your assets have changed and what steps you might need to take to improve your financial resilience.

A financial review isn’t just useful for assessing your assets. Following the breakdown of a relationship, your lifestyle goals and long-term aspirations might have changed too. So, updating your financial plan could ensure it continues to reflect the future you want.

4. Receiving an inheritance

Unexpected events don’t always harm your finances. Indeed, if you receive an inheritance or a windfall, it could provide you with greater financial freedom than you previously had.

Receiving a large lump sum out of the blue might feel overwhelming, especially if it’s through an inheritance and you are dealing with the loss of a loved one. When you’re ready, seeking tailored financial advice could help you understand how to use the wealth in a way that aligns with your goals.

Have you experienced an unexpected life event? Contact us to review your financial plan

Whether you’ve experienced one of the four unexpected life events listed above or you’ve been affected in another way, we could help you assess your financial plan to ensure it continues to reflect your new circumstances. Please contact us to arrange a meeting with one of our team.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

In July, the markets were affected by general elections taking place in the UK and France, and the ongoing presidential campaign in the US. Read on to find out what else affected investment markets in July 2024.

Uncertainty and numerous other factors may affect the value of your investment portfolio. However, for most investors, long-term trends are a better indicator of their strategy’s performance than short-term movements. Returns cannot be guaranteed, but, historically, markets have risen in value over longer time frames.

UK

The UK public took to the polls on the 4 July. The results of the general election ended 14 years of Conservative rule when the Labour Party secured a majority.

The following day saw the FTSE 100 – an index of the 100 largest companies listed on the London Stock Exchange – rise by 0.3% when trading opened.

Housebuilders saw some of the biggest gains as Labour made building 1.5 million new homes over the next five years a key manifesto pledge. According to the Guardian, Persimmon, Vistry Group, Taylor Wimpey and Barratt Developments all saw rises between 1.7% and 2.5%.

Mid-cap index FTSE 250 also benefited from a post-election bounce when its value increased by 1.8% and reached a two-year high.

New prime minister Keir Starmer stepped into the top job and received welcome news when official statistics were released.

Data from the Office for National Statistics shows that after no growth in April, GDP increased by 0.4% in May. The figure suggests the UK economic recovery is gaining momentum after a technical recession at the end of 2023.

Inflation remained stable during July, as prices increased by 2%, which is the Bank of England’s (BoE) target. The data paved the way for the BoE’s Monetary Policy Committee to cut its base interest rate on 1 August from 5.25% to 5%.

According to S&P Global’s Purchasing Manager’s Index (PMI), the momentum in the service sector in May started to slow in June. However, the slowed pace was linked to the general election as some individuals and businesses opted to see the outcome before they placed orders. So, the sector could see an uptick in July.

Despite the positive signs, many businesses are still struggling. According to business recovery firm Begbies Traynor, the number of firms in “significant” financial distress jumped by 10% in the second quarter of 2024 compared to the first three months of the year.

The numbers are even more stark when you compare them to the same period in 2023 – with a 36.9% rise. Of the 22 sectors monitored, 20 saw an increase in the number of firms in difficulty.

Europe

Inflation across the eurozone fell slightly to 2.5% in the 12 months to June 2024, according to Eurostat. The figures show inflation varied significantly across the bloc. Finland recorded the lowest rate of inflation at 0.5%, while Belgium had the highest rate at 5.4%.

With the headline inflation figure still above the 2% target, the European Central Bank opted to hold interest rates.

PMI figures suggest the manufacturing sector is struggling in the eurozone. It was partly pulled down by Germany’s enormous manufacturing sector, which has been contracting for the last two years, according to the PMI. A PMI reading above 50 indicates growth, so Germany’s reading of 43.5 in June suggests the country has some way to go before it starts to grow again.

The parliamentary election in France and its unexpected twists led to market volatility. On 1 July, the CAC 40 index, which includes 40 of the most significant stocks on the Euronext Paris stock exchange, was up 1.5% as it became less likely a far-right party would secure a majority.

The final shock results saw the formation of a left-wing coalition. The uncertainty around whether the left could work with Emmanuel Macron’s centrist party led to the CAC 40 falling by 0.5% on 8 July when trading opened. Yet, it returned to positive territory later in the day.

The EU is reportedly planning to impose an import duty on cheap goods amid concerns from retailers in a move that could affect foreign businesses, such as Temu and Shein. The current limit for import duty is €150 (£126.13), which allows some retailers to ship products from overseas while avoiding a levy.

US

The US presidential election doesn’t take place until 5 November, but candidates have already been campaigning for months.

Following an assassination attempt on Republican candidate Donald Trump, Wall Street rose on the 15 July. Expectations of a victory for Trump led to the S&P 500 index rising 0.42%. The share price of Trump’s media company far outstripped the market when it rose by 70% at the opening and briefly led to the business being valued at $10 billion (£7.76 billion).

With Joe Biden stepping out of the presidential race, the results of the election are far from certain and it’s likely to continue affecting markets.

Inflation in the US continued to fall in the 12 months to June. However, at 3%, it’s still above the Federal Reserve’s 2% target.

Official statistics also show that the US trade deficit widened slightly as exports fell by 0.7% month-on-month in May while imports fell by 0.3%. The deficit now stands at around $75.1 billion (£58.3 billion) and could be a drag on growth in the second quarter of 2024.

American cybersecurity company Crowdstrike saw its share price plunge by more than 13% when a software bug crashed an estimated 8.5 million computers around the world on 19 July. The error led to services grinding to a halt as it affected banks, airlines, railways, GP surgeries, and many other businesses globally.

Meta, owner of Facebook and Instagram, also saw its share price fall after the EU ruled it breached a new digital law. Meta’s advertising model that charges users for ad-free versions of its social media platforms that don’t use personal data for advertising purposes was found to breach consumer protection rules. Meta could now face fines of up to 10% of its global revenue.

Asia

A growing interest in artificial intelligence led to Japan’s Nikkei 225 index reaching a record high on 9 July, when it increased by 0.6%.

Over the last few months, statistics have suggested that China could face some challenges if it’s to maintain its pace of growth. However, data shows exports grew at their fastest rate in 15 months in June 2024 thanks to a boost in the sales of cars, household electronics, and semiconductors.

Year-on-year, Chinese exports grew by 8.6% to $307.8 billion (£258.8 billion). Over the first half of 2024, exports totalled a staggering $1.7 trillion (£1.43 trillion) – a 3.6% increase when compared to a year earlier. Coupled with weaker imports, it led to a record $99 billion (£83.25 billion) trade surplus.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.