UK: An Introduction to Private Wealth Law

Private clients and their advisers in 2022/23 

We all know that the past couple of years have been extraordinary. Private client legal practitioners and other professional advisers in this area have felt that in many ways, including on a very personal level. The people we all advise will continue to be affected by the economic slowdown coupled with rising costs of living, political uncertainty and unrest and post-pandemic recovery for some time.

That (perhaps unwelcome) fact is one certainty in what feels like a tumultuous and unpredictable environment; not ideal for planning ahead.

Those seeking advice from practitioners in this area include individuals performing a variety of roles and from a variety of backgrounds, including entrepreneurs, trustees, farmers, landowners, family businesses, personal representatives, and others. All are endeavouring to navigate through this fog of uncertainty whilst one objective remains common and essential – to plan a secure future for themselves and those around them.

Change and challenges 

Whilst lockdown restrictions have eased, the “new normal" has challenged our long-established working practices, and how clients and advisers interact. While that is certainly not unique to this practice area, it is keenly felt here. Private client advisers have had to adjust how they take instructions, approach sensitive issues and interact with vulnerable clients, though the ability to hold in person meetings again has been welcomed by advisers, clients and intermediaries alike.

In some areas rapid changes had to be made to solve the practical problems of working in lockdown. The temporary introduction of video witnessing of Wills was a welcome sea-change to a practice that has been in place for decades. While the legislation has been extended to apply to Wills made up until 31 January 2024, it is yet to be seen whether this will become permanent. However, new technology and clients’ expectations means that further developments in this and other practice areas are surely inevitable.

The changes at the Probate Registry have had a significant impact on personal representatives already trying to administer estates in difficult circumstances. The removal of the requirement to complete IHT205s for some excepted estates, the closure of many of the District Registries and the introduction of online applications has resulted in uncertainty and delays for personal representatives and beneficiaries seeking Grants of Representation.

The post-Brexit landscape remains a key issue and concern for many clients. The phasing out of farm subsidies and the introduction of the Environmental Land Management Scheme (ELMS), other “green” subsidies and opportunities for biodiversity net gain contracts looks set to radically change our countryside. Farming and land-owning individuals are, understandably, concerned about how all of this will work in practice, and how new trade deals, increased prices for agricultural inputs (due to the war in Ukraine, among other factors), etc., will affect their businesses. There is also concern about the lack of clarity to date over the interaction of the ELMS rules and agricultural property relief from Inheritance Tax (IHT), whereby there appears to be a risk of losing that relief if land is taken out of agricultural use under ELMS in order to support the Government’s green agenda.

There is still considerable uncertainty as to how the Government will fund the costs of the post-pandemic recovery, which has run to hundreds of billions of pounds. The prospect of increased tax charges is a clear concern for many people. Will a one-off wealth tax reappear on the agenda, perhaps, following the recommendations from the Wealth Tax Commission? Where this may have felt like a relatively remote possibility at first, the longer the economy is being propped up by government support, the more realistic a concern this may become. Many will be keeping a keen eye on the next budget, for any changes to the IHT and Capital Gains Tax (CGT) regimes.

The Office of Tax Simplification (OTS) and the All-Party Parliamentary Group for Inheritance Tax and Intergenerational Fairness (APPG) have been busy in recent times reviewing the IHT and CGT legislation. Numerous recommendations have been made to the Government in each case, including some quite radical ones which certainly raised eyebrows. Those included the abolition of agricultural property relief from IHT (an APPG suggestion), abolishing the CGT uplift on death and aligning the rates of CGT with income tax (an OTS recommendation).

All that said, the Government’s response to these papers was published on the “Tax Administration and Maintenance Day” in November 2022, confirming that there would not be any major changes to IHT or CGT for the foreseeable future – a slightly anticlimactic conclusion given the time which had passed since the OTS and APPG reports were published. That said, with a general election approaching in 2024, we query how far into the future that reassurance can realistically reach.

Opportunities 

What, then, has been the effect of this uncertainty around new trade deals, the impact of the war in Ukraine, changes to farming subsidies, a Government response to reports considering changes to the tax legislation (to mention but a few examples of the changes and challenges faced over the last year), with an overhanging threat of increased tax charges to pay for the government’s significant spending on COVID-19 related costs, on those seeking advice from private client practitioners?

It has presented an opportunity for both advisers and clients alike. For those who are thinking about handing on assets and engaging in succession planning, then given the potential tax changes on the horizon, such as to the rates of CGT to align with income tax, the abolition of - or at least significant changes to - the valuable agricultural and business property reliefs from IHT, now is a chance to make the most of a relatively favourable regime.

That applies across the board to individuals and trustees, whatever their background or assets, who may consider working with their team of advisers to put their succession plan into action if they have one, or otherwise to make a start on that planning process, because it is never too late.

We and other private client advisers will always hold dear the opportunity to become trusted advisers for individuals and their families. It is challenging at times, but moreover it is rewarding; particularly when we see the results of a previous generation’s planning in action. Now, perhaps more than ever with the general climate of change and uncertainty, there is an opportunity to cement these relationships and offer the consistency and specialist advice individuals are seeking.

The future? 

It is hoped that while the next year may bring about more change, particularly as a result of the next budget, that will at least address some of the unanswered questions we all have as to what will change and when, in terms of an increase to tax rates.

That should have a knock-on effect to the private client advice market, with individuals seeking advice and being keen to put their succession planning into action.