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Weekend reading: Should inheritance tax be 100%?

Weekend reading: Should inheritance tax be 100%? post image

What caught my eye this week.

Having made a case for higher inheritance taxes (IHT) in the past, I could have warned Abi Wilkinson to ask for danger money and a safe house when she wrote her piece for The Guardian this week.

Wilkinson writes:

Morally speaking, people who stand to inherit large sums haven’t done anything to earn that money.

An accident of birth placed them in a comparatively wealthy family and they’ve benefited from that their whole life.

This is the argument I make, too. People immediately start with straw man retorts – “Oh, so should rich children also not be allowed private tutors then?” or “Oh, so should rich children also be forced to live on Pot Noodles and never see a vegetable then?”

But I think that’s because in a world where we’ve decided to have a State and to fund that State with taxes, you have to go absurd pretty quickly to justify generous rates and reliefs for people who are (a) dead or (b) who did nothing to earn the money you are taxing.

These are taxes, remember, that rich kids not paying mean someone else has to pay. Maybe me or you? Maybe your kids, from their squeezed wages.

I understand – and was reminded by some of the nearly 2,000 comments on Wilkinson’s piece – that critics of inheritance tax (i.e. almost everyone) don’t see it that way.

They see 100% IHT as the State taking money from hard-working people who did the right thing and worked and saved all their lives and who are now being taxed twice. And they see the State giving it to indolent dossers via welfare and other benefits. (I paraphrase.)

Whereas I am full of admiration for people who work hard and save all their lives, but I see them as irrelevant once they’re dead. I see their children getting a freebie for doing absolutely nothing, on top of the other benefits having better-off parents gave them. And I see the victims not as the dead person in the grave, but rather the everyday people on minimum wages – or heck, the middle-class JAMs – who have to more tax on their incomes so that rich kids can get more money for free.

I’d tax inheritance at say 75% just because it’s the most moral tax. But I understand many of you feel differently.

Even my mum does – and I regularly urge her to spend the lot!

From Monevator

Five reasons why you’ll love index investing – Monevator

Do you have a money mind? – Monevator

From the archive-ator: Have you seen our huge link list of money tools and calculators?


Note: Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber.1

Report finds UK housing market still reeling a decade after the financial crisis – Guardian

Crackdown on (crazily) unfair leasehold practices confirmed – UK Gov

Santander cuts back lending amid Bank of England concerns over consumer debt – Guardian

The great rotation from bonds to stocks might finally be at hand – Bloomberg

Can you afford to live to 100? [Search result]FT

Products and services

Some tracker funds cost ten times more than rivals [Search result]FT

Charter Savings Bank’s new table-topping cash ISAs pay up to 2.15% – ThisIsMoney

LendInvest’s five-year bond pays 5.25% but definitely comes with risks – ThisIsMoney

‘Insta-bragging’ could invalidate your home insurance – Telegraph

Extra-long mortgages push up the age of borrowers [Search result]FT

Comment and opinion

Shame, status, and the American Dream – Bason Asset Management

Alan Shearer has much to teach us about inflation – The Value Perspective

Fund mismanagement – SexHealthMoneyDeath

What’s really putting the brakes on the UK housing market? [Search result]FT

Too much enthusiasm in the markets: Howard Marks’ latest memo – Oaktree Capital

Financially independent at 43 and roaming Europe in a motorhome – The Escape Artist

‘Disgusting and astonishing’: how do the UK’s top 1% view tax avoidance? – Guardian

The FTSE 100 has inched up towards fair value – UK Value Investor

Thought provoking interview with economist and Nobel laureate Myron Scholes – UBS

Why banks could prosper in the next stock market slump – Telegraph

Are solar funds paying 6% too good to be true? – Telegraph

The worst landlord horror story [US but interesting]Financial Samurai


‘A bit of me is dying. But I can’t stay’: the EU nationals exiting Britain – Guardian

A British negotiator says Brexit will be far worse than anyone expects – Independent

Off our beat

Why interviewing prospective new employees is futile – Medium

And finally…

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{ 118 comments… add one }
  • 1 Matthew July 28, 2017, 7:34 pm

    Yet both Norway and Sweden have abolished IHT in the last few years…

  • 2 ermine July 28, 2017, 7:35 pm

    Hehe – I hope you have your chainmail at the ready. There’s something in the human condition where people believe that a bit of them really does trancend death and lives on in their children, so it really is a bit of them being taxed twice. And that belief is not subject to reason 😉

  • 3 The Investor July 28, 2017, 7:56 pm

    @ermine — Yes, does seem almost old world mystical. Incidentally are you still blogging? Nothing new for what seems like months! 🙂

  • 4 Hospitaller July 28, 2017, 8:09 pm

    Oh boy are we at opposite ends on inheritance tax. I have indeed worked hard and intend to leave it to my children and a few charities. I view that as part of my life (not as you wish to pretend as somehow part of my death). As for the argument that we decided to have a State so should happily give our estates to it, that may be a common view in Communist states but it is an uncommon view here.

  • 5 Steve July 28, 2017, 8:21 pm

    Frankly, I’d rather die than leave my money to government, whatever that is. Seriously, we really are at risk of the process of taxation becoming simple theft by one section of society from another section of society. And if that is how it is going to be, we may as well do away with the half-polite veneer of “government” and go back to hand-to-hand fighting.

  • 6 The Investor July 28, 2017, 8:33 pm

    @Steve — Why is income tax not theft but inheritance tax is? I completely understand the argument that says “all tax is essentially theft”. I think that’s consistent, intellectually speaking, though I don’t agree with it. But why is the taxing of someone who is dead theft or who just got given it theft, but the taxing of someone who just spent 40 hours in the past week working for their money not theft? Genuinely don’t understand the argument, though it’s made all the time so clearly I’m missing something.

    @Hospitaller — I don’t believe I’m pretending anything. You’ll be dead. Maybe you’ll live on somewhere else — a discussion for another kind of blog — but your work/life here will be done.

    That’s science. If you want to give it away when you *are* still alive, do it when you’re alive. 🙂 As for your other thoughts you’re of course 100% entitled to your point of view, I’d only be repeating what I said to @Steve.

    I know I’m in the ultra-minority on this and it bemuses me, but hey ho, so were Darwin, Wilberforce, and Galileo in their day… 😉

  • 7 Ben July 28, 2017, 8:51 pm

    I have to agree Re IHT
    if the goveenmemt offered lower taxes in exchange for keeping it all when im gone, id take it in a heart beat, i wont be spending it where im going anyway.
    would it be nice to pass on something to my kids ? yes but id rather have it now to enjoy with them and hopefully bring them up properly so they know how to look after them selves.

  • 8 Simon July 28, 2017, 9:07 pm

    I suspect that my view of the role of the state in our world is rather different to yours. I am in favour of state involvement in providing armed forces and infrastructure. I see no role for the state in heath provision, education, state pensions, social housing or other forms of social security. All these latter can be dealt with by individuals including the large charity sector. So I am expecting that the role of the “State” in future will be massively smaller than today. Almost needless to say, I would regard the kind of approach to IHT which you are endorsing (if the article is not indeed a wily late April Fool’s) as going in exactly the wrong direction.

    By the bye, you cheerfully say ” If you want to give it away when you *are* still alive, do it when you’re alive”. That sounds like an nice idea but you already know that we cannot do that -because there are hordes of rules imposed by the State to stop us.

    Also, people make wills precisely so that when they are physically dead their wishes live on. So they are never just dead and gone.

  • 9 Steve July 28, 2017, 9:12 pm

    @Steve — Why is income tax not theft but inheritance tax is?

    @Investor I was not making that distinction. I see both as forms of theft.

  • 10 Christof July 28, 2017, 9:21 pm

    Where you are wrong is that inheritance tax doesn’t tax the dead, it taxes the survior… Let me illustrate this with a small example. A person lost their partner years ago and has four children. That person decided on their deathbed to distribute wealth as follows:

    The first child is employed as a consultant for an hour receiving a third of the wealth as the hourly rate.
    The second child is gifted a third of the wealth.
    The third child inherits the remaining third of the wealth (let’s ignore any legally required inheritances here)
    The fourth child has won the lottery the day before winning the equivalent of a third of the wealth.

    If you look at income or wealth of these four persons, each of theirs increased by the same amount. I ask you why should they be taxed differently?

    You gain income, you pay taxes. Whether that income is from labor, capital gains, inheritance, donations, investments shouldn’t make a different.

    I agree that inheritance shouldn’t be tax-free. It’s not double taxed, because the one who inherits never had the money before and never paid taxes. But saying the government should get 100% is plainly absurd. If you truly believe that I hope you gave any pictures of your parents or anything that belonged to your parents to the government, because anything else would be tax fraud.

  • 11 Cox July 28, 2017, 9:35 pm

    I work in tax and for me I agree 100%. Assuming we need to raise x amount of tax then i would much rather it come out of my estate than during my life. Particularly squeezed early years with new careers, family etc

    I also believe a high IHT would help aid social mobility for those who don’t have the luxury of money being passed down generations.

  • 12 John July 28, 2017, 10:16 pm

    I 100% agree with this article

    How can it be right that a man who earns £50k a year for 10 years is a higher rate tax payer yet his neighbour can inherit £1m off his parents and pay nothing. This does more to contribute to an unequal society than anything else.

    I would make inheritance tax 75% and put the threshold at the average yearly salary. There is no finer time to tax me than when I die, and my children can earn their own money.

  • 13 Robert July 28, 2017, 10:58 pm

    Why stop at a 100% wealth tax at death? Why not start decades earlier, such as a 100% wealth tax every year like communism. The time delay does not make the tax moral. I argue any death tax destroys incentives, and hurts multi-generational families. A family farm or a business cannot be passed down to the next generation since the tax man must be paid by liquidation. I suggest viewing “Milton Friedman Redistribution of Wealth and the Death Tax”. http://www.youtube.com/watch?v=km9OCw3f5w4

  • 14 Martyn July 28, 2017, 11:27 pm

    I guess it boils down to ownership. If an assets stops being mine to decide it’s fate when I die, why bother with the distinction of death?

    No one needs more than 100K so the state could argue that it’s acceptable to cap a persons wealth at that figure and take the rest.

    Moreover it will be fundamentally unfair, just like the rich don’t pay tax today ( including inheritance tax) neither would they pay 100% tax on death either. Take for example Richard Branson he is very rich, but rately owns anything, companies which he controls do and companies don’t die. Ownership of the company can be obscured with trusts and be registered in foreign countries, beneficial ownership can be moved effortlessly through the generations.

  • 15 Richard July 28, 2017, 11:35 pm

    I guess you need to think about the behaviour and consequences it would drive. First of all, are the allowances still in place? Is life insurance included in this tax? Are pensions? If not, what is stopping people from using their money today to buy large whole of life insurance policies to avoid the tax? Does a spouse still inherit without having to pay the tax?

    I am quite happy paying extra into my pension and having life insurance knowing that I will have a comfortable retirement and if I die young the money would go to my wife and small children to sort out things like the mortgage. If I know all of that would be taxed away in the event of early death, I would probably spread the money around wife and children, spending the cash now and maybe not even bother buying a house (not a good store of wealth anymore – esp if the spouse no longer gets to defer IHT). Would anyone want a mortgage? Would any bank offer one? Will the state pick up the peices of their lives?

    If I go so far as to live for today, and spend all I earn, won’t that add a greater burden on the state to provide for me later? Does it end up being a false economy? Then again, does anyone really plan their life around IHT?

    If the allowances are gone then the poor are stripped as well, and they are much less likely to have savvy financial planners.

    Of course the properly rich will probably all just up and leave, no doubt relocating their HQs somewhere more tax friendly. Or structure themselves to be never ending businesses.

    I guess finally, why should my giving away money in life be tax free (outside certain restrictions) but giving it away in death be taxed? Shouldn’t both be taxed exactly the same?

  • 16 The Investor July 29, 2017, 12:12 am

    I’m reading talk about how tax is appropriation, or about how IHT destroys incentives, or even how we shouldn’t have much of a State at all. Which is all fair enough.

    However it completely ducks the question, because the fact is we live in a State that does exist, and we’re discussing a requirement to raise revenue for that State via different methods, and specifically asking why IHT is more unfair (or not) then say taxing income. (Or, if you like, why it produces fewer bad incentives, or similar metrics).

    Whether States should exist and have the ability to raise (coerce) revenues from citizens is an interesting discussion, but it’s vast and for another day really.

    Nobody is putting up a convincing argument saying: “This is why it’s better than my son who did nothing to earn it gets £250,000 tax-free, while you had 50% all-in (say) taken off you every week via your PAYE and NI last year while producing goods/services that people needed and wanted.”

    That’s the question. Not whether we should be living in some survival of the fittest Ayn Rand paradise. That’s a theoretical discussion for another day, IMHO.

  • 17 The Investor July 29, 2017, 12:19 am

    @Richard — Fair summary of some of the problems. I agree with you about gifting, too, maybe in theory that should also be taxed at IHT rates. (I’m not saying you think it should, rather agreeing it’s logically consistent).

    I think the last time we discussed this on Monevator I was persuaded that I was morally right about IHT versus income tax*, but that practically it was just too hard to implement. I can see that happening again.

    Still, one day we couldn’t fly, and now we can. Who knows how the technology / governance of taxation will evolve.

    (*IHT versus income tax is as I say is the critical question in my view, not tax at all versus being a high-tech hunter-gather living on our wits in a no-tax State-less society or some feudal prince (or more likely for the vast majority, a pauper) in a more modern incarnation of such. Those are red herrings in *this* context).

  • 18 Mr optimistic July 29, 2017, 5:25 am

    Sometimes perhaps a fiction can be the truth. Some believe in life after death and are persuaded to live their lives in a certain way because of that. So the fiction has a real effect on behaviour. Maybe same with inheritance. The opportunity to leave something behind gives us an incentive to continue, and not just to say stuff it I know how this ends.
    If the State was to take 100%, that makes it clear the money was never really yours in the first place, just taking it back mate. So I think logical consistency should take second place to behavioural pragmatics.

  • 19 Barn Owl July 29, 2017, 7:29 am

    Nobody is putting up a convincing argument saying: “This is why it’s better than my son who did nothing to earn it gets £250,000 tax-free, while you had 50% all-in (say) taken off you every week via your PAYE and NI last year while producing goods/services that people needed and wanted.”

    If you consider the father and son as unrelated individuals in the same state, then this is clearly unfair. But they are not unrelated individuals. The Milton Friedman video referred to by @Robert talks about the unit being the family not the individual. Viewed from that perspective 100% IHT is a step away from families and towards making the state one big family. The state has a role, but so does the family. Where to put the balance is the real debate.

  • 20 John B July 29, 2017, 8:42 am

    All taxation distorts the market its applied to, 100% IHT would have the following, mostly undesirable effects

    1) The explosion of immortal companies and trusts
    2) Movement abroad to lower tax countries
    3) Many couples have uneven wealth because of child-rearing obligations, you’d lose that redistribution mechanism
    4) More poor single parent families
    5) Collapse of saving for old age
    6) People giving their wealth away earlier to keep outside the 7 year rule, and being disappointed that the care they expected in turn did not materialise

    Most of these will increase the burden on the state and reduce its tax base. If there is a strong incentive to die with no assets, many will overshoot and be reliant on the state earlier. I think your Laffer curve tax on IHT would not yield enough to compensate for the social problems.

  • 21 Richard July 29, 2017, 8:50 am

    I guess gifting tax vs IHT is really one of practicality. IHT occurs once, at a fixed point in time when the deceased finances are in effect frozen. HMRC would probably not want everyone ringing up every time they gave their kids £5 pocket money (this is where allowances would kick in). This is probably why we have the high allowances in the UK, to keep tiny estates from clogging up the system. Pretty sure HMRC would prefer to take tax via PAYE given the choice.

    Are you morally right? To an extent yes. But then would you give preferential treatment to your friends and family over strangers? Do you have things of sentimental value you would want to pass on to someone? Some of this is human nature.

    Perhaps the state should just confiscate everything and redistribute it back out to those it deems worthy. This way it could ensure investment in useful, productive industries, ensure a quality of life for all etc. The usual problem here is human nature tends to get in the way a little. We need an all powerful, rational, uncoruptanle computer to manage it all!

  • 22 The Investor July 29, 2017, 9:02 am

    Just quickly on family’s being a special unit, versus individuals, I’d say this is seductive in theory/language, but I don’t believe our society is constituted that way. (Perhaps it still was a few hundred years ago). In the absence of specifically contracted legal obligations, familial ties don’t work that way anymore.

    If the aforementioned adult son defaults on his mortgage, for instance, the mortgage lender has no recourse to his parents. If he commits a crime, again the State can’t seek redress from the parents. If an adult daughter develops a chronic and debilitating disease requiring long-term care or medical treatment, the State (/NHS) doesn’t first ask the parents to pay.

    I could see an argument saying that before children reach majority there should be no/low IHT. But as we’re currently operating, I think adulthood clearly marks a threshold on that sort of functioning unit these days — except in the special case it seems of giving children massive amounts of money tax-free.

    Even between married spouses where even I’d agree there should be no IHT at all, you see anomalies. I was flabbergasted a couple of years ago when a friend’s father died with credit card debts, and when he called the banks concerned they just wrote off the debts, rather than trying to get them repaid by his mother. Obviously no complaints for my friend and his family getting this news at a time of grief, but it didn’t seem particularly fair to me. But that’s a side discussion I suppose.

  • 23 The Investor July 29, 2017, 9:07 am

    @John B — Some interesting retorts, though I’m not sure I agree with them all. For example I am saving for my old age, despite no heirs. (I’d agree it will reduce saving for ‘life after death’ distributions!) Immortal companies is a big one, another of those practical issues. I don’t really understand 3&4, especially if taken in the round (i.e. the State would be richer, theoretically, so more provision for poor single parent families). 6 is a legitimate issue, but not sure the State should be legislating in such areas of human disappointments and frailties. I’d prefer old people bought annuities/something similar, with their money, and that familial care and attention was mainly of the non-financial kind. That’s in short enough supply, as anyone who has ever visited the average old age care home will attest.

  • 24 John B July 29, 2017, 9:15 am

    There’s the rub. Global communism is the fairest system, ‘from each according to their abilities, to each according to their needs’, but we know that doesn’t generate the wealth that capitalism does, where human traits like greed/competitiveness and family/tribe loyalty can be exploited, ultimately for the good of all through a re-distributive tax system. But that tax system must leave incentives for these human characteristics to work, so no 100% tax is ever a good idea, and why progressive taxation and allowances exist.

  • 25 Mark Gahagan July 29, 2017, 9:43 am

    I think that inheritance tax should be abolished completely along with income tax, capital gains and VAT. These should be replaced with a land value tax purely taxing the possible rental value of all land in the UK. This would be said by all land owners. In that way if the inheritance involves land the recipients can choose not to pay tax on an ongoing basis by selling the land or keep it in the family and pay their dues to society by paying the tax for being fortunate enough to now own some of the limited land nature has provided us.

  • 26 FI Warrior July 29, 2017, 10:34 am

    @Mark Gahagan. Now that is really interesting, it seems fair, balancing the incentive to create with the opportunity to do so and simplicity overall. (which makes corruption and ineptitude more difficult) You’d have to rip the power out of the cold dead hands of the elite though to institute this change from the current status quo of incremental kleptocracy favouring those born with advantage. Not much has changed with respect to land since the Normans ‘redistributed’ any wealth they came across into their own pockets; then ensured through law that their offspring would safeguard the result of that theft into perpetuity.

  • 27 Mike Rawson July 29, 2017, 10:37 am

    Don’t you think that if IHT was 75%, people would spend / give away their money before they died? I know I would. You would raise less money, not more.

    The only way to get people to like taxes is for the government to spend them on things people approve of. Which is not easy.

  • 28 Alex July 29, 2017, 10:49 am

    I can’t get past this line:
    “that’s because in a world where we’ve decided to have a State and to fund that State with taxes”
    Its actually the premise of all the rest of your argument, and if I disagree with it, I think this leads us to a different set of options.

    Well, when did we decide? I don’t think I did! It seems to me that I was born into this system, and then fully indoctrinated into it (‘its the worst system except for all the others’..). Where are the options for individuals who don’t want a state at all? How do I opt out? Of course, that’s a rhetorical question in this society, as I cannot opt out – I can only vote in order to get some left or right wing crooks, who then get to force their psychopathic opinions and laws on everyone else, with our blessing! For me, statism is a system of control, based on a big lie – that government has rights individuals do not have (you wouldn’t accept my taking your money, but its ok for a big gang to do so), and that by educating us (indoctrinating us) we actually want to maintain our shackles!

    Back to your topic, on the IHT issue, as an anti-statist, in my ideal world, of course I do not call for the state to take 75% or 100% of my inheritance. In a world with no state we would not pay any taxes. To imagine this, think of Lord Grosvenor and David Cameron’s trust arrangements – but without the subterfuge and the availability to all.

  • 29 John B July 29, 2017, 10:50 am

    The 3 pillars of capitalism are Labour, Land and Capital. You can’t tax one and not the others, as it would distort the economy too much. This is why we have a wide range of taxes, to spread their effects across the board. And you want to tax things with low collection cost and little opportunity for avoidance. Taxing gifts would not be good on either count.

  • 30 The Rhino July 29, 2017, 11:16 am

    Theres an alternative way of looking at this, and that is we pay 3 different types of tax:

    1. State tax, IT, NI, CGT, VAT, etc.
    2. Local tax, Council Tax
    3. Family Tax

    Each tax effectively redistributes wealth from the individual, just among a smaller bunch of people as you move down the list, i.e. state, local area, family.

    When you’re alive you pay those 3 taxes in a certain ratio that is generally acceptable, i.e. in a way that makes you grumble but hopefully not riot.

    The beauty of the family tax is that it requires no state intervention as it is so well aligned with human nature, it is self-administering (bar a few edge cases like child support). But have no doubt that it is a tax, you are simply coerced by your selfish genes rather than HMRC to pay it.

    As the state, your local council and your family still exist after your demise then why not simply pay IHT in the same ratios to those 3 tax recipients as you do when you are alive?

    Thats roughly what happens I think so in the spirit of Chesterton’s Fence maybe it should remain that way?

    Makes sense to me…

    In the OP’s spirit of generating contentious debate, there is a strong argument that TI, in arranging his affairs such that he pays no family tax, is a morally abhorrent tax dodger? I certainly think there is a rational argument to be made supporting the claim? He will almost certainly benefit hugely from those who do pay such taxes assuming he doesn’t die tomorrow and give 100% of his vast portfolio back to the state.

  • 31 Hotairmail July 29, 2017, 11:20 am

    I used to think that too. Indeed, what better time to pay your taxes than when you are dead? My mind is now changed though. It is too easy to avoid. (The Guardian itself should hang its head in shame at its tax avoiding status). Only the ‘little people’ pay it – which actually holds back overall social mobility.

    Instead, I would get rid of both inheritance and capital gains taxes and replace with an annual Land or Wealth tax. Just think of all the efficiencies – you could get rid of many tax avoiding Trusts, ISA’s, pensions themselves and lots of accountants wastefully employed to work the legislation to avoid tax. No one, not the government, employers nor pension companies have covered themselves in any sort of glory in relation to pensions. Their longer term nature means they are easily plundered or unreasonable promises dished out. Just let there be a decent base level State Pension for all and let people save to add to it for a decent retirement.

    Simplicity is the tax avoiders enemy – and that is what I propose.

  • 32 algernond July 29, 2017, 11:23 am

    Perhaps people would be happier with higher IHT if there as a choice to assign to the State or chosen charities?

  • 33 Martyn July 29, 2017, 11:26 am

    Easy collection of tax is somethig I strongly support. I worked on the council tax delivery (AKA the poll tax). It replaced the rates and none of us involved were keen. That said, being in the software business the governments endless specification ammendments was Xmas coming early, we hit councils for constant change requests, license to print money at the tax payers expense. That rather softened my opposition.

    The real issue however was collection. Rates was based on houses and houses didn’t move and belonged to people who were good citzens, by and large, hence collection was cheap and the amounts written off for non-collection noise. Contrast this with the poll tax, collection very expensive and the collection rate far, far worse.

    In my mind I ended thinking tax based on property was easy to collect, but that left the problem of a fraction of the population paying for what all voted for. In the end only those that pay taxes, in my opinion, should have any say in the running of the country pay no tax – get no vote.

  • 34 Mr optimistic July 29, 2017, 11:29 am

    Bemused by the article and don’t really follow the logic.

    So as things stand when I am alive I am entitled to call my money mine. I can give this to charity or fund a post-colonial war. Are we saying that in death the state should have the money because it spends money more fairly/morally than an individual?
    Still can’t see an argument for removing the incentive to ease the life path for your children, certainly no argument which says this is always a bad thing and should be prevented.

    If we were just a bunch of people eking out an existence in the edge of the forest and, through hard work, I build a semi-waterproof shack for my family. On my death should the shack be torn down and the wood distributed to the others who hadn’t managed to build shelter as it wouldn’t be fair otherwise?

    So government hands out money as benefits. It takes this money from current and future taxpayers. I leave money to my children. The latter is a ‘freebie’, but not apparently the former.

    Is the real question acceptance of the concept of ‘ownership’?

  • 35 greenasgrass July 29, 2017, 11:39 am

    One question: are you a parent?

  • 36 Richard July 29, 2017, 11:57 am

    Isn’t the end result the same though? Assets that were probably doing nothing productive are suddenly available again. Whether the government pays a doctors salary or the inherritor buys a house with it, that money is being moved around the economy again. Being taxed each time it moves. So the question really is one of who gets to spend the money that they didn’t earn, the state or the I inherritor. Who knows, the inherritor spending the money may actually be better for the economy and overall tax take than the state, because they are more likely to spend it in a capatlist, free market way.

    Envy of the person who gets to spend the unearned winfall may not be the best driver of change.

  • 37 Mr optimistic July 29, 2017, 12:11 pm

    Look forward to a future article on the morality of the national lottery.
    Probably straining TI’s patience but can I add a couple of cautions?
    First, denial of the family has a poor history in terms of consequences in the hands of politicians. Care needed.
    Second, the Labour government in the 60’s had a concept of unearned income. Wealth has to be created after all so why not prevent its accrual first rather than chasing it down later? So imagine working on a building site: blisters and honest toil. Clearly earned income. Now imagine someone who had saved a bit and invested it and then sat back in front of his computer and watched it grow through no effort of his/her own. Perhaps pension, perhaps just a freedom fund. Unearned income though. Think thats fair -is gain through sitting back and tapping into the efforts of others somehow different from just being handed money by your parents?

  • 38 Dragon July 29, 2017, 12:24 pm

    Really guys, you need to stop reading the Guardian. It’s bad for the blood pressure. 🙂

    Being lectured about paying more tax by the Guardian, who, lets not forget, have structured their own affairs both offshore and very tax efficiently, really is something beyond parody.

    It seems even the saintly Abi has a sneaky fondness for a bit of inheritance behind the bike sheds – she would now like to “…keep what it takes to get out of [her] overdraft + maybe a couple of grand cushion…”

    Hat tip to Mr. Staines for highlighting this little gem in her twitter feed.

    And you can bet that when push came to shove, “overdraft” would include the mortgage and car loan, and the “couple of grand cushion” would need to be enough to send her own kids to a selective, fee paying school.

    I totally get the argument from the likes of the Monevator guys who are no doubt living like monks to accumulate vast amounts of wonga so they can FIRE about how inheritance gives the already well off a further cushion againsts life’s little vicissitudes, and maybe their own wills do provide that it is all going to go to charity once they are pushing up daisies.

    The issue I personally have with more taxes going to the state is that at the end of the day, even with the state, you are still dealing with people. The crucial difference is that these people have power over the rest of us. Giving more money to the state, on current experience, doesn’t seem to actually increase beneficial outcomes beyond a certain point (now is this the laffer curve, Murphy’s corollary or something else?).

    The NHS is a prime example – you can fire-hose it with money and yet it always seems to be 24 hours from total collapse. And the reason is obvious – if you make something totally free, people will use it according to their expectations.

    The problem is that once you hand lots of money to the state, someone has to administer that money. Which means you need to set up a department, find accomodation, staff it, light, heat, IT it, etc etc etc, the staff need to be paid, (well) pensioned, etc etc. More money to the state just seems to go on empire building and less and less seems to reach the front line.

    Charities are another example of that – we’ve all seen the scandals about how 50p (or whatever figure it is) of every £1 donated seems to go in overheads and vast salaries for those at the top.

    Ultimately, my own view is that those advocating higher taxes always seem to want it for other people – Abi being but the latest example. We can all get wrung out for 100% but she needs to keep a large wedge of her parents estate to “pay off her debts and keep herself comfortable”.

    Easiest thing in the world spending other people’s money and as the great lady said, the problem with socialism is that eventually, you always run out of other people’s money.

    On a side note, someone mentioned “immortal companies and trusts” as a possible way of dodging all this. Problem is, you’d start to fall foul of this then I think:-


  • 39 Noedig July 29, 2017, 12:53 pm

    My view is simply that earned income should be subject to a lower rate of tax than unearned income – i.e. that inheritance income is less deserved in some sense, and a fair target for higher tax. Currently there are various allowances and exemptions, see https://ah-ltd.co.uk/tax-rate-information/inherit.html, which approximate to “Your estate will owe tax at 40% on anything above the £325,000 inheritance tax threshold when you die”. I see no reason why increasing that to 50% would cause hardship, when the alternative is increasing tax on money one has earned in ones life for which one may well have immediate use.

    My father in law was a trust lawyer. His view is that inheritance tax is largely voluntary, as people can give away your belongings before death, and that people choose not to do so means ‘people distrust their relatives more than they distrust the government’

  • 40 Matthew July 29, 2017, 1:19 pm

    If you tax inheritances the rich will have less to invest, so share prices would be lower and companies would be less able to raise funds by issuing new shares, that’d limit new job creation and therefore wages.

    If you want to help the jams, more jobs have to be created so we have to cut taxes on the wealthy so they can invest more

  • 41 Vanguardfan July 29, 2017, 1:21 pm

    I think that gifts during life and on death should be taxed as recipient’s income, in a similar way to the taxation of bequeathed pension pots.
    This would be fairer, imo, and also get rid of the difficulties of judging how much to give during your lifetime by treating gifts in the same way.

  • 42 Carl July 29, 2017, 2:01 pm

    I agree with Vanguardfan. Reduce IHT to zero, tax recipients as income. Removes the death tax nonsense, as clearly those paying tax are those receiving the income.

  • 43 Adrian July 29, 2017, 2:25 pm

    Those hoping to inherit shortly are key voters – the government is keen not to upset them. May had to backtrack completely over the “dementia tax” that threatened those eagerly waiting for the passing of an elderly relative!

  • 44 Mr optimistic July 29, 2017, 2:28 pm

    @noedig. Fine if you can predict your own death more than seven years in advance and be sure you won’t need access to money for care.

  • 45 Matt July 29, 2017, 3:23 pm

    Reduce income tax to a flat rate of say 25% and tax all inheritance at the same amount. Done.

  • 46 Martyn July 29, 2017, 3:54 pm

    Politically speaking I don’t agree with a lot of where the tax take goes. I also don’t favour handout as it doesn’t encourage the behaviours I like to see. I therefore tax plan in so far as possible to the point where I won’t make that money of the tax on it is 40%. This is essentially to avoid my money supporting things I don’t support.

    If they ever attempt a 100% IHT I will do whatever it takes to avoid it (and given I’ll be dead and beyond their reach whatever it takes has literally no bounds.)

  • 47 Matt July 29, 2017, 4:41 pm

    The problem with having IHT at 50-100% is that people will just blow it before they die. And those whose parents die unexpectedly are then penalised.

  • 48 PC July 29, 2017, 5:01 pm

    Couldn’t agree with you more on inheritance tax. Sadly we are in a minority. At least we could tax the recipient at their marginal income tax rate.

  • 49 UK Value Investor July 29, 2017, 7:09 pm

    +1 for IHT at marginal income tax rate.

  • 50 Gadgetmind July 29, 2017, 7:17 pm

    People’s capital has already been taxed, when earned, when it pays any income, and in many cases when it rises in value. Threaten confiscation on death and people will simply leave the UK before that happens. Capital in pensions (and thus taxed less) is subject to tax when withdrawn (even when inherited) but capital outside of them, which has been taxed to the hilt at every stage, needs to be treated more gently.

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