Inheritance tax 'moral'
Dream on. Creatures from Planet Fabian arrived on Earth this week with logical plans to make Inheritance Tax both effective and loved.
For a tax that is paid by someone else and only falls due when you are dead Inheritance Tax remains illogically unpopular. In 2001 more than half of those polled wanted our Government to follow the American example and scrap it. Even though most people have never inherited anything and fewer than 6% of estates are large enough to be taxed.
On Planet Fabian Inheritance Tax would be replaced by a tax on all the gifts you received during your life. Once they exceeded £80,000 – from the living or the dead – tax would kick in at 20%, rising to 40% once the total received went above £240,000. Small gifts below £2000 would not be counted. Anti-avoidance rules would prevent large gifts to one person being sliced up to avoid the tax.
This arrangement treats transfers of wealth in the same way as earnings or capital gains which are already taxed when we receive them. The Fabians also suggest the new ‘Lifetime Capital Receipts Tax’ should be seen as part of Government plans to relieve child poverty. They hope both things would put the tax on the moral high ground.
A similar levy has existed in Ireland for more than 30 years. The lifetime threshold varies from about £30,000 to about £300,000 depending on the closeness of the relationship between the giver and receiver and there is one rate of 20% charged above the threshold. Many of our other continental neighbours have tougher taxes on inheritance than we do. France even imposes an annual tax on wealth.
But however close our countries look from space, Fabians should realise that Britain is in fact a million miles from both Ireland and France. The revival in the political fortunes of the Conservatives can be dated precisely to 1 October 2007 when shadow Chancellor George Osborne made his headline-grabbing pledge that a future Conservative government would raise the threshold for Inheritance Tax to £1 million. Although the biggest winners from the change would be the very wealthy with millions to leave, the promise struck a popular chord.
Because we all believe that by passing a house, however modest, to our children we join the landed gentry. It may not be logical. But we dream on.
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