Business relief (BR) is being utilised by the majority (83%) of advisers and wealth managers as an inheritance tax (IHT) planning tool for clients, according to research from Time Investments.
The estate planning solutions provider said many advisers favoured using BR into estate planning because it offers a faster route to IHT relief - it explained BR required only two years to gain IHT exemption instead of seven years with gifting or trusts.
Time said 12% of advisers recommended BR at least once a month as their preferred IHT solution for clients, with an additional 34% recommending it every three months. It added the majority (76%) were using it up to twice a year.
The research, which surveyed 214 financial advisers and wealth managers in September, also showed that when recommending BR, 27% said they use AIM BR services exclusively or more than unquoted services. Time said this was "somewhat of a surprise given the relative volatility of the AIM index".
However, the majority of AIM for BR purposes is held within an ISA, as this is the most straightforward way to ensure an ISA investment is free of IHT after two years, whilst maintaining the tax benefits of the ISA wrapper, the firm added. A third said that they use quoted and unquoted in equal measure.
Time Investments technical specialist Henny Dovland said: "The popularity of BR as an estate planning tool is growing because it offers investors a faster route to IHT relief than gifting or trusts. However, although many advisers are writing BR business, it is still an under-utilised opportunity, despite offering tangible value to client outcomes."
Time explained despite its effectiveness as an estate planning tool, analysis of government data shows that the use of BR as an IHT exemption has reduced. It said only £1.9bn of BR exemption was claimed by 2,820 estates in the 2019/20 tax year, down from £2.5bn claimed by 3,240 estates in the previous year.
The research follows record IHT receipts of £6.1bn for 2021/22, an increase of 14% on the previous year and the largest single-year increase in five years.
Time said IHT was a major concern for many families as the Office for Budget Responsibility predicted that the trend would continue.
