Inheritance tax. Apparently, it’s a bigger issue for voters than any other political subject.
Why would this be? After all, currently less than 10% of estates are liable to the tax. When it comes to tax, it’s far less widely felt than VAT, National Insurance, Income Tax, or duties on fuel, alcohol and cigarettes. Of course, everybody who owns a newspaper is likely to be affected. Many of the senior journalists on national newspapers and on the TV could potentially be. I’d be surprised if most of the Tory front bench are not likely to need to pay some death duties.
However, the vast majority of people will be totally unaffected by increases to thresholds for Inheritance Tax. So why are people so worked up? Of course, everybody hopes (can I use the Brownite word ‘aspires’) to be rich enough by the time they die to leave a substantial amount. More to the point, everybody secretly hopes that aunty Mabel is sitting on a pile of cash and that she’s put it aside for us. However, the reality is that the average person is unlikely to be so fortunate. Even if you are lucky enough to inherit, say, a 1 million pound estate, the current taxes would still leave you with over £700,000. If aunty Mabel was only worth half a million, you’d get 84% of the value.
The Tories may have wanted to get rid of it completely, but have come up with a new threshold of £1 million. Given that it’s the super-rich who are likely to be able to spend a bit of time and money on tax planning away much of their obligations, and they’d be getting a cut of £280,000 anyway, this would be a long way towards removing the tax completely. Given that the Tories are not telling us that we can cut overall taxes, that means that billions would have to be found somehow.
Alistair Darling has announced changes, which effectively mean that the £300,000 allowance is transferred to a widow(er). As no inheritance tax is liable on estates passed between husband and wife (or, I believe, civil partners), it means that when the remaining partner dies, the estate gets an allowance of £600,000. Fine if you’re married, a but annoying if you aren’t.
Skuds has an idea – rather than tax the estate, why not tax each inheritor according to how much they get? Lateral thinking there.
My feeling is that Inheritance Tax is fair – it’s no more unfair than any other taxation at least – although the quick increase in property values has caused people to worry that the middle classes might come under the cosh (and we can’t have that now, can we?). I think that it would make sense for either the main home to be exempt, or for the average house price to be a factor in determining the allowance (I quite like the idea of a formula rather than the Treasury every now and again picking an arbitrary number for allowances on tax).
Mind you, on a related note, it’s quite odd to hear the Tories complain about their policies being stolen. They nicked the idea of a flat rate for non-domiciles from the Lib Dems (and they attacked it as unworkable at the time).