New analysis has suggested the private client sector is set to see a period of negative growth for the second consecutive year in 2023.
Specifically, according to LexisNexis’ latest Gross Legal Product Index for the private client sector, there will be 1% less work in 2023 than in 2022 having seen a 3% drop the previous year.
This comes after demand in the sector grew by 17% in 2021 in what the report described as a “post-pandemic boom” which saw “renewed interest in new and exciting investment opportunities [domestically] and abroad” having witnessed a 16% drop in demand during 2020.
Yet, the report suggests that trend is already in the rear-view mirror:
“The current economic environment combined with political instability and various other factors have resulted in a culture of risk aversion.”
The figures come from a broad range of datapoints and statistics covering the number of trust and estates, charitable donations, taxation of non-domiciled individuals, and dozens more areas.
Key trends across the private client sector
Drawing upon statistics from HM Revenue & Customs (HMRC), the report makes clear that the number of trusts is falling having declined by over 20,000 from 2016 to 2021.
That said, the total income and chargeable gains of all trusts and estates in 2021 sat at £6.51 billion, an increase of c. 7% from the prior year. the total income tax and capital gains tax payable on those estates in the same year also rose by c. 5% to £1.455 billion.
The number of individuals claiming non-domiciled taxpayer status in the UK on their self-assessment tax returns also fell in 2021 from 2020, dropping c. 11% from 76,500 to 68,300. However, the total income tax, capital gains tax, and national insurance contributions paid by those taxpayers stayed roughly the same with £7.896 billion becoming £7.878 billion.
Charity donations and tax reliefs
Total reliefs for charities and donors remained steady in the 2021-22 tax year, as shown by the graph below. Gift Aid fell 3% to £1.3 billion compared with the previous year, though the report puts this down to HMRC conducting extra risk assessments during March 2022 which will be attributed to the next financial year.
It’s also said that non-domestic rates (business rates) reliefs and Inheritance Tax reliefs for donations were down £2.4 billion (less than 1%) and £0.8 billion (down 4%) respectively. The proportion of individuals declaring a donation via self-assessment for 2021 is steady at 11% (although the number of donors has dropped 4%). Total donations declared by self-assessment individuals for that tax year also fell, standing at £3.4 billion.