Should the Unpopular ‘Death Tax’ be Eradicated? Inheritance tax, often referred to as ‘death tax’ is unsurprisingly not the most favoured of taxes. However, pledging to eradicate this type of tax could be a capricious move. Being forced to pay out harsh taxes in what is usually a particularly tough time in family life is not nice for anyone to experience. The questions do arise however of how the tax cut would be paid for? Would other taxes emerge, even current taxes raised? Or would we see a huge decrease in public spending?
A Safety Net
To the Conservatives, inheritance tax (IHT) is their life raft on a sinking ship. Some are seeing the PMs consideration of abolishing IHT as an act of desperation for his election manifesto. But this is not the first time this idea of changing the ‘death tax’ has come into play. Former Chancellor, George Osborne, had this similar idea when he and David Cameron were concerned regarding the speculation of Gordon Brown calling for an election in the autumn of 2007. The plan from Osborne to exempt the first one million pounds in tax greatly aided in the unification at the Tory’s annual conference. In turn, locking in headlines that pushed the polls in their party’s favour.
A similar approach from Rishi Sunak will not necessarily prove to be a successful one but it does seem as though he could be acting on his fear from Labour’s electoral prospects. From opinion-based polls and just word of mouth, it is clear that inheritance tax is not popular at all, for obvious reasons.
Could a promise to eradicate this type of tax be the push Sunak’s party needs?
Many members of the public may not know the ins and outs when it comes to inheritance tax requirements. Would the opinion polls show the same results if those who answered had been briefed beforehand on the outlines of what is required for IHT.
The majority of homes valued at less than one million pounds are exempt from IHT, the tax is also paid by less than 1 in 25 people in Britain’s population, and that around seven billion pounds a year is raised from inheritance taxes. Without those seven billion pounds a year from IHT, where do the government find it, what does the country lose out on?
A Capricious Move
Some Conservatives believe that people with average earnings would still be against the IHT as they aspire to be within the top earners one day also, and people tend to mostly favour the taxes that fall on others instead of on themselves.
Most voters can see the value in passing on assets through generations of the family. However, the value is balanced in practice through the imposed tax on the significant minority of the most wealthy. For others, the factor of progressive taxation comes into the conversation, meaning that taxes should be equated in proportion to the ability to pay. Therefore, believing that the wealthiest should carry the largest tax burdens.
Inheritance tax zones in on rudimentary inclinations the same way as income tax did in the past but no longer does. When weighed against the other options, the debate can seem quite compelling. This may work when looking at the country as a whole, but it does not necessarily help or benefit people individually.
The Impending Question
It would seem that ultimately, the debate for whether to keep or eradicate inheritance tax is the reflection of the Conservatives endeavour to make Labour look financially thoughtless. With the arising question from the Tory party remaining the same; “If your policy were different, how would you pay for it?” If and when the Conservatives put forward a promise to eradicate the so called ‘death tax,’ they will be asked that question. But will they have an answer that is a better solution for the country?
Inheritance and Succession
Inheritance and succession is about creating a plan for lifetime investments and wealth management as an individual. Most people want to minimise the inheritance tax burdens for their loved ones. By focusing on personal circumstances, we can tailor a plan to suit your specific needs.
Succession planning and the transfer of assets can be an intricate process, we work to ensure both a smooth transition and to manage the tax complexities. Contact one of our Wealth Managers today to get started.