Financial advisers have been warned to quickly assimilate the changes in the Government's new Financ...
Financial advisers have been warned to quickly assimilate the changes in the Government's new Finance Act, with an estimated half-a-million clients expected to fall foul of the regulations.
According to research by Skandia, there are around 500,000 policies presently under trust with benefits that exceed the nil rate band for inheritance tax (IHT). The insurer added that this figure does not include clients with pre-budget trusts, whose benefits may exceed the IHT nil rate band in future due to investment growth.
Under the Finance Act, introduced last month, clients could face IHT charges that did not exist when their policies were first set up. Clients with pre-budget trusts that exceed the nil rate band, or may do in the future, could also face new entry, 10-year periodic and exit charges in the event of a change to the policy.
Where a beneficiary is changed after 6 April 2008, apart from on their death, and the new beneficiary is not absolutely entitled to the benefits, tax charges may also apply.
Colin Jelley, head of tax and financial planning at Skandia, commented: "Now that the Finance Act has been passed, advisers have the clarity needed to ensure that their clients are not unexpectedly caught out by this new stealth tax."
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