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IHT enquiries soar by 20 per cent, says Way Group

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Inheritance tax related enquiries rose by 20 per cent in the three months to the end of November, according to fund manager and high net worth financial planning specialist The Way Group.

As speculation mounts on Alistair Darling’s strategy regarding thresholds for the death tax in next week’s pre-Budget report, Mark Benson, Way’s technical manager, says the substantial rise in enquiry levels from high end independent financial advisers in the past three months reflects an improving economic environment, buoyed by the prospect of City bonuses.

“The key driver here is the significant rise in property prices seen in top end post codes in central London and also Home Counties and the Shires estates. Prices are now more or less back to early 2007 levels, with the prospect of further rises of around five per cent in 2010,” says Benson.

The rise in enquiries for IHT planning solutions has also been underpinned by the sharp turnaround in share portfolio and pension fund values.

“When both financial and property markets went pear shaped back in October 2008, demand for IHT planning specialist services inevitably tailed off – but now, with the City bonus season with us as well, enquiry levels are back up to pre-crash levels,” says Benson.

The threshold at which inheritance tax becomes payable is due to rise from GBP325,000 for a single person to GBP350,000 from next year.

City speculators suggest Darling is considering freezing it at its current level to help cut the massive deficit in the public purse post-bank bail outs.

 This means that the heirs of more – not fewer – householders would be liable to pay the 40 per cent tax if property prices rise.

Homeowners with assets worth between GBP325,000 and GBP350,000, whose estates would escape the tax net if the threshold is raised next year, would be hit by GBP10,000.

Current inheritance tax rules mean that couples can transfer their allowance to their spouses in the event of their deaths.

Options being considered by Darling are also said to include freezing the threshold at GBP350,000 for several years from next year. While this would not have much impact if house prices stagnate, thousands of families would face crippling bills when the housing market returns to full health.

“There is no time like the present when it comes to long term tax planning, now is the time to transfer assets into IHT protected schemes, while prices remain relatively cheap,” says Benson.

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