The scrapping of inheritance tax sounds like a costly mistake, but it is a noble idea. If everyone's personal income, including legacies and gifts, were taxed like wages, that person would pay the marginal rate, 20%, on a small legacy, while a company director at a salary of £150,000 would pay the top rate, 45%. Abolishing the £325,000 tax-free amount and levying income tax on legacies would instead replace the income lost from scrapping inheritance tax several times over.
Would it be possible to equalise tax taken from wages, pensiis, dividends, capital gains and legacies? I can not find a fag packet to do the calculations, but I reckon this might provide the missing £350m a week promised for the NHS.
It raises little in proportion to other taxes, and there is no moral justification to tax an individual on their death. The argument that inheritance tax is only paid by 3.7% of the population is neither here nor there. It is a pernicious money-grab by the state. Why should a state benefit from the assets of a dead person?
The US has a far more favorable exempt amount - currently $12 million, though this is being reduced to $3.5 million in 2024. The wealthy are not subject to the US estate tax, which is owed to the wealthy.
The nil rate band of £325,000 should be increased to £1m. House prices are so high that the price even when supplemented by the main residence is insufficient to absorb the tax cost, leaving families forced to sell the home in order to pay the tax.
An argument often used against inheritance tax is that it is wrong to tax people on income that has already been taxed. Most of the estate left by many is made up of funds that have never been taxed, as a result of house-price inflation or investment in a personal retirement pot.
It is logical to think that the 4% who are liable for inheritance tax are the most wealthy people in the country, but our bonkers system means that this is not the case. My parents had to pay inheritance tax on their estate, partly because of complicated rules that changed after they made their wills.
Research worldwide suggests that less productive, less healthy, and less happy societies are more likely. For as long as the children of the wealthy continue to inherit, their advantages and life privileges will be passed down at the expense of greater society for the rest of their lives. IHT is not whether to set IHT at 100% or less, but at 100% or more. The advantages that the wealthy have received should be partially redistributed to the children of the wealthy.
One idea would be to allow inheritance of the dead's home to the national average house price, but taxed as income beyond. Then, all other global assets would be taxed at 105%, with all other assets being taxed at the same rate. It would start to bring about a meritocracy over a generation or so, but would yield dividends in education, health, social cohesion and happiness immediately.