Scrap IHT to make wealthy pay more tax, urges think-tank

by Property118.com News Team

9:56 AM, 6th January 2011
About 8 years ago

Scrap IHT to make wealthy pay more tax, urges think-tank

Make Text Bigger
Scrap IHT to make wealthy pay more tax, urges think-tank

Inheritance Tax is unfair and unpopular and should be scrapped in favour of a new ‘gift tax’, argues an influential think-tank.

The Institute for Public Policy Research (IPPR) claims inheritance tax (IHT) is too easy to sidestep for the wealthy and estates are rarely charged at the IHT rate of 40%.

This top rate of IHT is charged on the value of any estate exceeding £325,000, but the IPPR claims the 40% rate is misleading and argues that an estate of £1 million does not pay £400,000 IHT at 40% but £270,000 at 27%.

This is best shown by calculating the example:

Value of estate =                                 £1 million

Less tax-free amount =                       £325,000

Total amount chargeable to IHT =      £675,000

Tax on chargeable amount at 40% =   £270,000

The IPPR argues a capital tax on cash and non-cash gifts exceeding £150,000 between individuals would be fairer and more effective, especially if the gift was taxed in rate bands that meant wealthier individuals paid a higher rate of tax than others.

The proposed rates are 20% on gifts between £150,000 and £300,000; 30% on gifts between £300,000 and £450,000, and 40% for gifts above £450,000.

That would mean the tax on a £1 million estate would work out at £400,000 rather than the current £270,000.

“IHT raises only £2.2 billion from a dwindling number of estates,” says Nick Pearce, director of the IPPR.

“It is also highly unpopular, despite best attempts to defend it. There is no political prospect of radically increasing its scope and revenue, so it is time to give up on it.

“The proceeds of a switch from IHT to a capital receipts tax could be used to fund an expansion of free nursery education, a key driver of social mobility; this would be the best way of passing on opportunity, not privilege, from one generation to the next.”

He added that the IPPR expected the proposal to raise an extra £1 billion a year in taxes.



Comments

7:47 AM, 13th January 2011
About 8 years ago

I can see nothing fair in any proposal which taxes a dead person who no doubt paid their tax in full during life.

Gareth Thomas

10:47 AM, 13th January 2011
About 8 years ago

As remarked upon in a previous post, the Government take enough tax during our lifetime. I find it totally reprehensible that they continue to take more from those astute enough to build wealth in order to lift themselves and their family's lives out of poverty or job seeking mediocrity!
I'm leaving this country and I'll pay NO tax to this scummy Government!

17:28 PM, 13th January 2011
About 8 years ago

As a socially orientated person the idea of IHT sits comfortably with me; in that the landed gentry of old (such as the Duke of Westminster) should not benefit generation on generation without 'working' for a living; unlike us hard working , risk taking property investors who have built an empire (however small). 2 ways to overcome this - any wealth gained from 'work' during the persons lifetime should be free of IHT i.e. the inheritance gained at some time in the past should be taxed (similar to CGT and for simplification at the same rate) on disposal. Another way would be to make any inheritance that is passed on as a pension to children free of tax; this would retain the money in the circular economy generating wealth, provide a better place for our children, reduce the pensions timebomb, prevent squandering of assets, allow the next generation to spend more freely now as their old age is partly provided for and wouldn't cost the government a penny .... other than lost IHT - bit of one of those win/win scenarios

17:33 PM, 13th January 2011
About 8 years ago

Interesting thoughts, thanks for sharing them Greg.

22:26 PM, 14th January 2011
About 8 years ago

I think the tax should be on the receipt of inheritance over £250k (for example) rather than the estate. This would encourage wealth to be spread out, rather than concentrated on a few and would not penalise those who receive £100k as an inheritance from a larger estate - people might spread out inheritance between children and grandchildren, helping the grandchildren at a more useful time in their lives than when they are comfortable and their parents die.

2:26 AM, 16th January 2011
About 8 years ago

I agree with kitschen pink; inheritance tax is nothing but legalised theft by governments of money or wealth that has already been amply taxed when it was generated.

2:29 AM, 16th January 2011
About 8 years ago

Oh, forgot to say that I have been so incensed about this tax that I researched the matter and found out that anybody can actually put their assets beyond the reach of any government quite easily and affordably. Bad tax law just encourages more and more people to take action like this.

8:55 AM, 16th January 2011
About 8 years ago

I agree that IHT can be legally avoided or insured against and that the process is affordable. Tax law is complicated though and advice should be sought from a qualified specialist who carries Professional Indemnity insurance to back up their advice. If you would like a second opinion on your plans I would be happy to refer you to the people who look after me. They offer a free initial two hour consultation. By all means email me at mark@property118.com if you would like an introduction.

15:20 PM, 16th January 2011
About 8 years ago

I say nay to the "death tax". It's sole purposes are to enrich the government while attempting to stop what is refered to as "dynasties". A term used to describe inherited family wealth and accumulation of such over generations. This tax is nothing more than blatant robbery of the hard earned monies of the people who worked their entire lives to earn it. Wealthy or not is not the point it's of no relevance how much the inheritance is, no family should be forced to work hard for a lifetime just to be robbed of it after death and be unable to secure the lives of their children and grandchildren. This tax is an abomination and certainly doe snot effect only the wealthy. I tire of people justifying robbery using wealthy people as a red-herring, because they are jealous of their accomplishments. I believe that if the money earned by the company in question or person who has died, has already been taxed during the lifetime of the deceased another tax is oduble taxation and the second tax at 40% what an outrage all citizens should fear any government with such a tax. If you ever wonder why you can never secure your families future, take a good look at the "death tax", and don't support it. The bible calls this type of injustice Usary, and the Qu'rran calls it Riba, marked as one of the 8 haneous sins.

15:29 PM, 16th January 2011
About 8 years ago

I am very proud of you for standing up against the socialisation of your country, we have the same "death tax" in America. I find it reprehensable and find the government does it with the support of uneducated who simply are very jealous of the accomplishments of the rich. I say that it is usually us who make people and fmailies rich. We all want cars, I-Pods, Computers and electronics and we pay no matter what they cost because we "must" have them, but then we ask for a refund through government socialized theft, and ask that those we make rich spread the money around? If that's not the most illogical concept I have ever heard. Another poster commented that this would spread the money to hard workers? Um, wait a minute by this standard anyone who recieved money not from work for nayreason is not earning it, so why would it matter who or how many people the money was distributed too? it is not the responsibility of others to share with you just because your family was not able to provide the same to you in their lifetime. There's an aweful lot of growing up for people to do. Remember there have been thousands of small mom and pop businesses that were destroyed due to this tax, the not only take into consideration the financial assets but also land and equipment. I watched the story of a man who inherited his parents horse ranch, the government estimated his property and actually charged him 40% on the property and the money and the business had to liquidate and close down. There is no justice in this tax.

1 2

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Tenant requiring some advice please

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More