Massive Financial Planning wealth management transfer underway
According to estimates as much as £550,000,000,000 (that’s £5.5 trillion or £5.5 thousand billion) worth of Financial Planning wealth management is going to be transferred from one generation to the next in the next 20 to 30 years. That’s according to the Kings Court Trust. This is the wealth accumulated over the course of the mid to late 21st century, much of it fuelled by increasing house values. Our children are about to do very well!
One of the issues around this Financial Planning wealth management transfer is what it’s going to be spent on and how and where it will be invested. According to the research only 50% of financial advisers have a plan in place with their clients’ children even though 80% of them say that want to invest the money they inherit. This links into the current issue with the advice gap in the UK with only 9% of people using or even being able to find a financial advisor.
Inheritance Tax and Financial Planning
Inheritance Tax will also become a big factor. It’s already an issue for an increasing number of families given that the nil rate band has not increased from £325,000 since 2009. That means that every year more and more estates fall into the Inheritance Tax trap as house prices increase. In the latest period from April to June this year over 32.1 billion was collected in Inheritance Tax (IHT). The tax now affects nearly 7% of all estates in the UK. Once seen as only being paid by rich landowners now more ordinary families are being caught. Especially in the South where house values are highest. Unless the threshold is updated in line with inflation the numbers paying IHT will continue to rise. There are ways to mitigate your IHT liabilities of course by using trusts to protect your assets. We are seeing more and more clients needing to use trusts as part of their Financial Planning wealth management solutions. In the end this will start to lead to less tax being collected as more families protect themselves.
Tax and Financial Planning
Financial Planning can also help with your tax bill. The number of people paying tax in the UK has now risen to 36 million people in 2023/24 as a result of the frozen tax thresholds. 5.6 million people are now paying the higher rate 40% tax. An increase of 40% since 2021. A further 850,000 pay the highest tax rate of 45% up an incredible 99% in the last three years.
The top 50% of taxpayers pay 90% of all the tax taken in the UK and the top 1% of earners pay 30% of all the tax. You can be sure that they take advantage of Financial Planning wealth transfer advice.
HMRC have said that they are now writing to over 500,000 people who they think should be paying tax but who aren’t currently in the self-assessment system. It’s estimated that 150,000 of these will be pensioners who will be paying tax for the first time since they retired. It’s likely to come as shock to thousands of families.
Under 40’s are also being caught in the tax trap. According to Quilter 3.6 million under 40-year-olds will be paying higher rate tax by 2027. That’s 20% of all under 40’s. In addition, 500,000 under 40’s will be paying additional rate tax. That’s if the tax thresholds don’t change and there is no indication from Labour that they intend to change them.
Beware of crypto as part of your Financial Planning
The FCA has just fined UK based crypto broker CB Payments (part of the Coinbase companies) just over £3.5 million for continuing to facilitate crypto trading without having effective financial crime measures in place. In other words, the FCA are concerned that their crypto may be being used by criminals. This involved over 13,000 people buying over 3175 million in crypto. There’s obviously a profit margin in the business because the firm say that they will pay the fine on time in return for a 30% discount. Money laundering is one of the biggest concerns around crypto trading which is why the FCA has required firms to demonstrate that they have the necessary controls in place.