Inheriting the wind

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).

8 Responses to “Inheriting the wind”

  1. Skuds Says:

    It does seem to be the most important issue doesn’t it?

    Its a bit like how Michael Moore describes the situation in America where the establishment (for want of a better term) have instilled the American Dream in everyone so that even the poorest think they have a realistic chance of becoming millionaires and so oppose measures designed to tax the rich.

  2. Gordon Seekings Says:

    And as I said to you this morning Owen when you mentioned “They nicked the idea of a flat rate for non-domiciles from the Lib Dems (and they attacked it as unworkable at the time)” it’s typical of the Tories and Labour – pinching all the best ideas from the Lib Dems.

    · Charging aviation tax on planes, not passengers (passed by Liberal Democrat conference in 2004)

    · Taxing non-domiciles (passed by Lib Dem conference in 2007)

    · Increasing the inheritance tax threshold (passed by Lib Dem conference in 2007)

    If there were intellectual property rights protecting political ideas the Lib Dems would be a very rich party indeed.

  3. Danivon Says:


    Given than your lot are unlikely to get into government, save as part of a coalition, you should be quite glad that some of your ideas still have a chance to get put into practice.


  4. Gordon Seekings Says:

    Based on the results in Horsham yesterday (Lib Dem 602, Con 554, BNP 163, Lab 52 and a Lib Dem gain from the Conservatives) I don’t think it’s likely your lot will at the next General Election either….. 🙂

  5. Gordon Seekings Says:

    Actually I now have the full result and turnout etc. and it looks like the Labour vote actually went up in percentage terms.

    Horsham DC, Holbrook West Ward

    Lib Dem 602 (43.9%; +11.1%)
    Con 554 (40.4%; -6.5%)
    BNP 163 (11.9%; +11.9%)
    Lab 52 (3.8%; +0.2%),

    An independant stood last time the seat was fought in May 2007 which explains the disparity of 16.7% in the percentage change.

    The turnout was 32.2% which is reasonable for a DC bye-election and the result was, as I said earlier, a Lib Dem gain from the Conservatives.

  6. Danivon Says:

    Having walked around that ward, I’m surprised that we get votes at all. You can hardly extrapolate to a General Election from an affluent ward in the most middle class town in the country. You might as well predict the national Tory vote from a by-election in Moss Side.

    But as you say, we actually gained in percentage terms.

    If the turn out was high, it was probably due to the higher focus on the election from the UAF as well as the BNP, forcing the Tories and Lib Dems to do a bit more work than usual.

  7. Ron Ball Says:

    I just found this blog today, hence a bit late in commenting. Quite a step from inheritance tax to a Lib-Dem win in Horsham by-election and whether its is the most “middle-class town in the country”. Is it? How do you measure?
    Inheritance tax is unfair because it targets the people in the SE much more than in the North. A house with a value above £250,000 in the North would be fairly substantial. Here it is at best an ordinary semi and in some parts not much more than a garden shed. So with just a few other investments your Southerner is over the threshold and has to sell the family home to pay the death duties; the Northerner does not. There is no such disparity on straight investments or cash.

  8. Danivon Says:

    > whether its is the most “middle-class town in the country”. Is it? How do you measure?

    Umm, on income and assets of the inhabitants, on self-declared status, and on having lived near it all of my life and been to school there. Enough?

    > Inheritance tax is unfair because it targets the people in the SE much more than in the North.

    Hmmm. It is not ‘targetted’ at a place, it is not a brand new tax introduced by New Labour, it’s been around for decades and was always simply ‘targetted’ at the most valuable estates (even now only about 8% of estates are liable).

    Besides, high property prices in the South do provide a few benefits for the owners, not least of which is the ability to leverage credit.

    You also forget that the tax is only paid on the estate of a dead person – and so the people who pay it are still getting a load of money or assets – a £250,000 house is still worth less than a million pound house.

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