George Osborne considers reform of inheritance tax

A week ago ConservativeHome readers approved a call for the abolition of inheritance tax.  On Sunday Stephen Byers issued his surprise call for the abolition of the "unfair and punitive" tax.  The Taxpayers' Alliance was impressed with the Byers intervention and feared the Conservative Party was in danger of being left behind:

"What is also interesting is the fact that the Lib Dems and now factions within the Labour Party are starting to see the potential that campaigning on taxes has. The Lib Dems have correctly judged that the issue of thresholds is extremely powerful electorally - we think the same. And Byers is right that the public also dislike inheritance tax and that message can be made popular, just as Alan Milburn was right to flag up the issue of the failure of tax credits back in the Spring... Unfortunately, many in the Conservative Party are still determined to campaign today as if we were still in the 1990s. They cling to a belief that talking about lower taxes will make them look "selfish", "out-of-touch" etc. That is wrong and they risk being left behind if they don't accept this fast."

This morning's Telegraph reports that George Osborne thinks it "irresponsible" to commit to scrapping IHT this far from a General Election but he did say that he was looking at reform options.  These include "raising the threshold, cutting the rate, or exempting a person's primary home".

Comments

[James Hellyer]

George Osborne thinks it "irresponsible" to commit to scrapping IHT this far from a General Election...

Given that the £3.6 billion it raises annually is so little in terms of government spending that it could be made up or saved eleswhere with no hardship, it's hard to see his comments as anythiong other than an admission that he lacks the political will to cut taxes.

[James Maskell]

I suspect he'll go for a raise in the threshold but nothing more radical than that. He doesnt want us thinking he supports lower taxes. Heaven forbid that we Tories would support lower taxes.

One proposal which caught my eye was the possibility of merging income tax and national insurance... I can see a plethora of problems in actually doing it but the actual idea of it is rather interesting.

It kills me to say it but from what Ive heard about what he had to say yesterday, some of the ideas were reasonably good. That said, I need to se the full speech to se in what context these ideas are set.

[sjm]

Tories talk about cutting taxes, and the response from Labour is - see Alastair Darling responding on Sunday to Byers' proposal - 'it'll mean cuts to Health & Education!!!!'.

So we have to learn to forestall this with something like 'it will mean cuts in payments to Brussels/fewer political advisors/fewer quangos etc etc'. If our front men do this till they're blue in the face, it will eventually get through to the brainwashed public, perhaps even before the next GE!

[Paul Kennedy]

One proposal which caught my eye was the possibility of merging income tax and national insurance... I can see a plethora of problems in actually doing it but the actual idea of it is rather interesting. 07:41

I think the biggest of those problems will be the headline figure, which based on the current figures would be something like 33% and 52%. It would be a very "honest" and simple income tax and something that I have advocated for sometime. Protests would of course come from pensioners and those deriving their income from investments who would then pay what would be the NI element of the new income tax, but I'm sure with thought, maybe other changes elsewhere and salesmanship the problem could be overcome.

With regards to IHT, maybe as a start, the primary residence should be disregarded from the calculation?

[Esbonio]

"Protests would of course come from pensioners and those deriving their income from investments": too true. "I'm sure with thought....and salesmanship": that is the last thing needed for what would represent a massive tax hike for the aforementioned groups. Still the way today's Tory party acts, who gives a damn. Wait till you are on a pension or living off investements. (FYI I a not.)

[Ted]

There was an article last weekend on the re-cycling of goods to claim VAT back fraudulently. Estimated cost to UK was £6.7bn.

So cutting that fraud in half would pay for abolition of IHT. If we picked out specific areas of unecesary or wasteful expenditure & tied that back to "returning money to the tax payer" Labour would have less to try to hit us with.

[John G]

I've said it before; I'll say it again.

People always spend THEIR OWN money more wisely than when politicians do it for them

Let's phase out IHT gradually, and let's start by restoring it to its original status as a "rich man's tax"

[tapestry]

Ted's got it right.

[David Belchamber]

"One proposal which caught my eye was the possibility of merging income tax and national insurance... "
I agree with James Maskell @ 07.41 and have suggested before that there might be mileage in frequently quoting what the average taxpayer actually pays to the Treasury when NI is added to tax.
As NI is a tax, the only reason not to merge them is because the result is staggeringly high, so let us condition the public to what Gordon Brown is actually taking from us.
When we get back, it could then be mitigated to a certain extent by showing separately the contribution to the state pension (incidentally it infuriates people whom have contributed to this for over 40 years to be told they are receiving benefit, not a pension, so the tories could alter the nomenclature).
I also agree very much with sim @ 08.40:
"So we have to learn to forestall this with something like 'it will mean cuts in payments to Brussels/fewer political advisors/fewer quangos etc etc'."
We must mount a continuing campaign to point out areas where Nulab wastes taxpayers' money and promise that our first task will be to prune that.

[tapestry]

Do we want rich men spending all their time planning for IHT? No, we want them investing , planning, building, improving - and their families. Why not build some dynasties for once who compete with the best in the world, who plan and invest longterm and keep winning? Why are the English the poorest 'rich' in London with Russiand and Arabs buying up our best assets?

Murdoch pays little tax. His father Keith started the business. Now look where they are - ruling the world. Not a great example maybe, but why think in terms of individuals all the time? People do better when they work as families. Their country and the world do better too.

[Esbonio]

As regards IHT whilst I am generally against it in principle (illiberal, a tax on already taxed assets etc) I also recognise some of its supporters' arguments (encourages enterprise and fragmentation over concentration of assets). That said the IHT limit does now appear ridiculously low. And of course the really rich get round it through trusts etc. There is a related issue here of the elderly losing their homes when they need care in later life. Perhaps a simple way to alleviate the burden of IHT along with raisingg the limits without abolishing it altogether would be to abandon
the 7 year rule.

[Esbonio]

Well said Tapestry. The UK is a tax haven for the super rich. It is those in te middle and near the very bottom who are clobbered by the government becuase the government knows they do not have the options to move on.

[Chad]

Well done to the TPA, but this is just embarrassing for Osborne as he is simply responding to the agenda set by Labour after Byers' call to scrap IHT.

It should be the opposition forcing the government's hand, not the other way around.

[Ted]

Regarding the 7 year rule - Polly Toynbee has been campaigning against it on basis it is a way of escaping IHT so there is presumably a discussion in left wing opinion formers that Polly has picked up on. I wouldn't be surprised if Gordon raised the IHT threshold but also put limits on the 7 year rule to catch more tax there or limit severely what gifts/transfers could be made so ensuring a bigger estate for IHT purposes.

I like Osborne's suggestion that the main home is excluded from IHT. This takes most estates out of IHT as its house values that are the problem for middle income families. Its then a tax on inherited wealth not homes which is a fairer tax (though still double taxation) than currently.

[John Coles]

If Mr Osborne cannot make a decision about a tax that raises £3.6 billion out of a total tax take of £520 billion, then what is he about? Is he innumerate or simply too frightened to make a decsion about 0.7% of the tax bill. He's a bit of a bungalow I fear - not much up top.

[tapestry]

If homes are singled out, house prices will rise even more. What's wrong with people risking money in business ventures, shareholdings, venture capital, international investment funds and so on? For God's sake, why are we so anti-business in this country? Do we want foreeigners not only living here but also owning everything? We need wealthy Brits to compete. Get a life.

[clive]

The problem about excluding main residence from IHT is that it would encourage the oldies to live on in houses that are really too big for them,when in fact the market needs these to be released. It would just raise the price of houses which are already too high because they are a CGT ploy. So, damaging for everyone.

The correct way to draw the teeth of IHT is to double the threshold and halve the rate. That is easy to remember for people who are interested in policy, it would reduce avoidance so would not have that great an effect on revenues in the medium term, and it could presage a complete restructuring of IHT into a different form where it could relate to the income/wealth of the receiver rather than that of the benefactor.

[tapestry]

right. then you have a tax that raises less than 1 billion. scrap it.

[deborah]

Re merging income tax and NI:

"I think the biggest of those problems will be the headline figure, which based on the current figures would be something like 33% and 52%."

Yes, the headline rates are appalling, but we are paying these tax rates now - why aren't we shouting these numbers from the roof tops?

[Esbonio]

Tapestry

I agree that we do not have a particularly business friendly environment. This is especially so as regards general employment legislation which puts a huge burden on employers. There are however a wide range of tax breaks available to those in the know (and with the means) so far as business owners and investors are concerned hich in comparison to the CGT exemption on houses for people of modest means seem quite reasonable. If we want to me tax fairer then reform must be across the board.

[Cllr Francis Lankester]

Red herring-tax on working people is the real problem, and the disincentive to get a job. More likely to be electirally saleable and popular too.

[Chad]

If you combine the scrapping of IHT with popping house prices into the inflation calculation then it will prevent a repeat of runaway hpi of 2001-2002, producing, steady, fair rises (and long term stability) that do not outprice a whole new generation of house buyers.

So homeowners can may be no better or worse off as they will get steady, lower annual gain accumulation, but will not be taxed on those gains at the end, but it would stabilise the market for the long-term.

But first, imho, we need to bring house prices down with a rate rise or two as they are too high. Once they have been brought down to a fairer value (ie stripping out the runaway growth of 2001-2002) then you can both scrap iht and add house prices to the inflation target and the result will be long term stability in the housing market removing the short-term anomalies that either produce unfair gains or debts (depending on your perspective).

It's simply not fair to enable one small section of the population to make a massice capital gain simply because they were born in year x and thus caught the market at a low. This is not earned, this is simply "luck of the draw" and is bad for long-term stability.

[James Maskell]

Could someone turn off italics please...

[Londoner]

I agree with Tapestry and Clive (9.38 & 9.40) that a principal private residence exemption is the wrong way to go, both for the reasons they give and because that is the one aspect which may not be double taxation because of the CGT exemption. We want investment portfolios and businesses cascading down the generations as well as houses.

However, despite having been one of those advocating the principle of abolition here last week, I think that Osborne is probably wise just to say there will be major reform and review, and therefore a possible PPR exemption should just be treated as a holding/debating point. He could also usefully add that if the Treasury did its sums and proposed abolition, the Opposition would support it in the House. This sort of talk gives enough hints so the people who care about it notice but no prior commitments. Then in the first budget, provided the growth projections are such that there are "proceeds of growth" to "share", you announce a programme for its abolition. Abolishing exchange controls, slashing the top rate of income tax to 40% and giving the Bank of England independence were all done without prior warning soon after elections.

In the meantime, the real work for the Treasury team is proposals for tax simplification. Most of these cost money so one can publish the proposals but say that implementation will depend on conditions at the time - but you've done the work and indicated the direction of travel.

[Paul Kennedy]

Deborah 09:52. They are, and we can only "shout those numbers from the roof tops", if and when we are able to offer lower alternatives.

Esbonio 10:02 is right, reform and hopefully much greater simplification must be across the board, tax must be simple to understand, simple and cheap to calculate for both the Revenue and taxpayer ( sorry if that creates unemployment amongst the accounting fraternity, but that's life) and very difficult or impossible to avoid, hopefully releasing resources to investigate evasion more thoroughly, afterall it was, as I understand, the Revenue who "did for Al Capone".

[Cllr Keith Standring]

As a free-market, libertarian Conservative I welcome the suggestion from Stephen Byers MP that Inheritance Tax should be scrapped. I am appalled that George Osborne can apparently only raise sufficient enthusiasm to consider "reform" options.

Inheritance Tax is absolutely unjust. People are taxed when they earn money, taxed when they spend money and taxed when they invest money - what right has the state to seize yet more when someone dies? Taking £3.6 billion from the pockets of bereaved families is appalling. The Government should be encouraging people to work hard, save and take responsibility for their families, and abolishing Inheritance Tax would be a step in the right direction.

[Esbonio]

In addition to removing the italic, is there a
more flattering photo of Osborne available?

[Chad]

Done?

[James Maskell]

Editor, please rectify the italics problem. People, including John G, please make sure any html you use is done right before pressing "Post". Otherwise I think the problems with me, not the html...

[Denis Cooper]

As a rational minority has pointed out, IHT is not in reality double taxation which punishes hard work and thrift as is constantly being claimed.

If there was previous taxation that applied to the deceased, not the beneficiaries of his estate, and if there was hard work and thrift that was also on the part of the deceased, not the beneficiaries.

A son could lounge around for most of his life doing nothing useful and sponging off his parents, if not the state, and then inherit a huge lump sum without having ever made any effort and without having ever paid a penny in tax.

Conversely he could have been working like a dog in a job, plus spending almost all of his time outside work and a lot of his own money caring for his parents as they aged and became dependent.

It makes absolutely no difference to the tax paid on the estate; there is no reward for hard work and thrift on the part of the beneficiaries, or lack of reward because they've been lazy and selfish spendthrifts all their lives.

Similarly it makes no difference to the tax paid on the estate whether all of it will go to an only child, or it has to be divided among several children plus maybe an impoverished aunt. The only difference is if one of the beneficiaries is a charity.

This is why both for greater fairness and also for simplicity any tax should not be levied on the estate as a whole, but on the separate legacies received by each of the beneficiaries.

George Osborne should look at the Irish system of Capital Acquisitions Tax:

http://www.oasis.gov.ie/death/taxation_issues/capital_aquisit_tax.html

I don't say that we should follow the Irish example in every detail, but the crucial change of principle is stated in the first paragraph:

"Capital Acquisitions Tax is really two taxes - Inheritance Tax, which may apply when a person dies and leaves assets to another, and Gift Tax, which may apply when a person during his or her lifetime gives a gift to another. Both taxes are payable by the person who receives the gift or inheritance. The relationship between the giver and receiver is important."

Further:

"You may receive certain gifts and inheritances up to a certain value without incurring any Capital Acquisitions Tax liability. The amount involved depends on the relationship between the donor and the recipient and on other gifts/inheritances received. Jointly owned property becomes the property of the survivor by virtue of joint ownership and may be liable to Capital Acquisitions Tax.

Thresholds for 2006

There are certain thresholds above which Capital Acquisitions Tax applies. The appropriate threshold depends on the relationship between the donor and the beneficiary. Gifts and inheritances between spouses are free of Capital Acquisitions Tax. A threshold of 478,155 euro applies to gifts/inheritances made by a person to his/her child..."

As I've heard that this is the system which the EU wishes to impose in the long term, I'm making a huge personal sacrifice by nevertheless recommending it.

The other change I would recommend is that the revenues should no longer go to the Exchequer possibly to be frittered away, but instead to a free-standing British Educational Trust for the educational benefit of children from poorer families, and in particular to provide the brightest with university scholarships.

At least then if we had to pay tax on a legacy we might feel that it will do some good for the disadvantaged of our society, while strengthening both its unity and its future economic potential.

[Henry Mayhew]

Wouldn't cutting NI make more sense first?

[George Hinton]

IHT is a tax on death and extremely unfair.
Osborne needs to remember that the tax was brought in by Labour, it was part of their policy of redistribution and taxing the privileged. The usual envy from the left against others who have more and an interpretation of the old Stalinist dogma to each their needs etc.
The estates that are taxed are accumulated from net income and it is inequitous. Whilst NuLab try to spin this story by saying that only 1.6 million householders are affected, it is the middle classes who bear the brunt of the tax. The super rich can afford to take steps to mitigate the tax.
As ever when it comes to the old socialist legislation it is driven by envy and the need to smash the class enemy.. as if one existed.
It is high time that this tax was ended and George Osborne should be in the lead of the demand for reform, not yielding ground to Byers, that arch turncoat and autarchic fascist.

[esbonio]

I cannot agree with Denis's suggestion which sounds like the Capital Transfer Tax we had under old Labour when they wanted to squeze the rich till the pips squeak.

[Richard]

"A son could lounge around for most of his life doing nothing useful and sponging off his parents, if not the state, and then inherit a huge lump sum without having ever made any effort and without having ever paid a penny in tax."

Maybe so, but that isn't the government's business. Frankly I find something deeply wrong about the idea of taxing what is effectively a gift from one member of a family to another. Why should people lose money just because it changes hands?

[Jake]

Inheritance tax was introduced in the 1890's as a method of decanting some of the wealth off the super rich and spreading it around a bit . An excellent idea . The persent problem is that it starts at far too low a level . £1 million has been mentioned as a reasonable starting point - should be more like £2-3 milion . The 7 year rule is also wrong . Should be 2 years - no more .

Another point re Osborne - he is committed to taxing England at 3p in the pound more than Scotland . In addition to the Barnett Rules! This is DIRECTLY contrary to the Act of Union 1707 and would finish off the already parlous British state .

( maybe that is what he wants )

[Chris Gillibrand]

Italics does this work

[Jake]

Inheritance tax was introduced in the 1890's as a method of decanting some of the wealth off the super rich and spreading it around a bit . An excellent idea . The persent problem is that it starts at far too low a level . £1 million has been mentioned as a reasonable starting point - should be more like £2-3 milion . The 7 year rule is also wrong . Should be 2 years - no more .

Another point re Osborne - he is committed to taxing England at 3p in the pound more than Scotland . In addition to the Barnett Rules! This is DIRECTLY contrary to the Act of Union 1707 and would finish off the already parlous British state .

( maybe that is what he wants )

[Steve]

It seems bizarre to me that anyone should advocate a complicated series of amendments to IHT which can only massively increase the tax code and ramp up earnings for smart accountants.

We're supposed to be Tories aren't we?

So let's simplify.

This tax is double taxation despite semantics to the contrary, it raises peanuts and should be abolished - thus appealing to thousands of voters whose support we need.

[Chris Gillibrand]

Wonderful. As someone who lives in Belgium with a second house in the UK, it looks as if I could be clobbered even more under these proposals.

Abolish this state licensed theft.

[Ted]

Denis Cooper - I think (as mentioned above that Polly T has raised) this several times) that its likely the Teasury are looking at taxing gifts. Don't like it as a gift in life is from taxed income. Lets have fewer, simpler taxes that don't have people searching for ways around them.

I liked the Osborne "exempt main home" because it's good politics. Defending a tax break for the wealthier - which abolishing IHT is - while restraining spending elsewhere is bad politics. Exempting homes gets to the nub of most peoples fear of IHT and is defensible. Reduces IHT take considerably and makes its eventual abolition easier.

We need to be able to present a portfolio of tax changes - for example reductions in business taxes which the economy needs, rebalancing personal alowancs to take the poorest out of tax, simplification and changes to the tax credit system which are and look fair. Abolition of IHT is difficult to include in this mix but exempting homes isn't.

[Steve]

Increasing the threshold and reducing the 7 year rule to 2 years would result in even less revenue being generated.

Thus, abolish it. Simple.

[George Hinton]

Rather than restrict the chat to IHt why can't we reform the whole tax system.
Taxes are a penalty against success and typical of the petty minded envious dogma of the left.

[Paul Kennedy]

Not quite George 11.24, they do pay for centrally supplied services, although I of course accept there will be a debate as to how many and to what level, should be paid for out of taxation.

[James Sproule]

I am very much in favour of merging NI and Income tax, after which the rates would be 33% and 41% (NI is not levied on top rates of tax), leaving those of us who like a flat tax a lot closer to our gaol than we might realise (albeit at a very high rate). The problem is NI is not levied on those over 65, nor on investment income, so any combining will have to deal with the aggrieved pensioners some of whom will see a substantial increase in their tax bills.

As to IHT, there are really two arguments. The first is should we remove the immediate pain it is causing, in which case raise the threshold or exempt main homes. This avoids having to tackle the broader issue of envy based politics so beloved by the left and too often feared by the right. If we are willing to say it is an iniquitous tax which raises little, and therefore it should be eliminated, we gain an additional benefit of removing bureaucracy. There is probably no tax which is more avoided through tax planning than IHT. Given that this tax planning is hardly value adding to the economy, eliminating it is of undoubted benefit. The value of elimination is difficult if not impossible to quantify, but it is there, just as the negative effects of Brown’s stealth taxes are slowly becoming apparent.

Finally, we have seen our savings rate collapse. There are a number of interesting studies which show that the ability to make intergenerational transfers of wealth actually encourage savings. This is called the ‘bequest effect’. We should as a matter of course be looking at policies both within a short term political framework, and within a longer term strategic plan as well. What kind of economy and society do we want? For 0.6% of our present spending, the elimination of IHT gives a clear signal of the direction we intend to move.

[Denis Cooper]

IHT is not a "tax on death" - that's ridiculous - and it's no more "double taxation" than having to pay VAT on something purchased out of taxed income is "double taxation". An annual tax on the wealth of the living would be genuine "double taxation", which is a serious objection to both council tax and Land Value Tax. Taxes on the income and capital gains from personal savings and investments are also "double taxation" in my view, and a more important candidate for relief. But those who receive legacies did not previously pay any tax on the money or assets which formed the estate: any tax was paid by the deceased, not by the beneficiary, and neither have been subject to any "double taxation" through IHT.

On simplicity, I think anybody who has been the executor of an estate where IHT was due would have been mightily relieved if the Inland Revenue had told them:

"You don't need to worry about inheritance tax on the estate: just distribute the gross estate according to the wishes of the deceased, and notify us of the beneficiaries, and we'll take up the matter of legacy tax with each of them".

[Steve]

Or better still, anyone who is an executor doesn't have to deal with the Inland Revenue at all.

[esbonio]

Denis Cooper at 11.48

If one is a 40% tax payer for each marginal £100 you earn, you net £60. If you then spend that £60 on goods subject to VAT levied at 17.5%, the revenue will have received nearly £49 of your original £50.

It would of course be worse were the circumstances contemplated by those so keen to merge NI and tax. Pensioners on 40% tax would become 50% marginal tax payers which would increase to 57.4% if they spent their disposable income on goods or services fully rated for VAT. Still that is not as bad as the 60% marginal rate I was paying in 1987. Instead of hitting pensioners and those who have saved or invested why not jack the marginal rate up to the rates I used to pay for those on say over 100 or 200k per annum. Of course I am joking; and it would not be popular with the metropolitan yuppies.

Merging NI and income tax would also have to deal with the fiction that it pays for national health and the state pension.

The Tories should remember I think that the average age in the UK is about 40 and I believe in the next election there will be more people over 50 than under it in the electorate.

[Denis Cooper]

Even without IHT they would still have to make sure that any tax due on the interest on accounts held by the deceased, and so on, had been paid, just as they would have to make sure that all of his debts, funeral expenses etc, had been paid, before distributing the estate. But they would not be responsible for making sure that IHT was paid; they would distribute the estate and merely send a notification of the beneficiaries to the Inland Revenue for them to follow up. As my wife is presently dealing with her father's estate I'm sure that she'd be greatly relieved if that was the case now. It would also go a long way to removing the need for complicated trust and other tax avoidance schemes.

[Andrew Langley]

Abolishing IT is something I have campaigned on within the party for many years, but we have to be very careful in how this looks, in the eyes of swing voters in marginal seats. I would want some firm evidence from pollsters and focus groups that such a policy would not reinforce old stereotypes and thus hold us back.
I believe at this stage with 3 years to go, George Osbourne is right to be cautious in making policy committments on tax.
I also believe that we should merge NI and PAYE rates, into one simple flat tax, with higher thresholds, that can be transerfable between partners who have kids and one doesn't work.
The two consequences are that
a) pensioners and savers need other breaks
b) you have a high margin rate, in the mid 30s. For me this is the way the centre right can regain the tax spend argument.
Unfortunately tax payers are ignorant. Gordon Brown knows this better than anyone else. The only way we can reinforce the message that we are in a high tax, wateful spend regime, is for people to see it in black and white every week. Simplyfing tax to one higher tax rate, puts the focus back on tax cutting in budgets as a vote winning issue, as it was in the 80's.

We have to sell any tax message as revenue neutral in the first 2 years. This enables us to commit to labours spending plans, destroying their "which hospital are you going to shut". we can argue that we would spend money differently - eg more bobbies, than ID cards etc.

Finally, abolish stamp duty and capital gains tax as well, and pay for it via higher income tax rates for people over 100k. IT, CGT and Stamp duty raise £10bn out of £600bn - but imagine all thouse accountants and lawyers having to do something more useful and creative for the economy, rather than the current dead weight loss we have of tax avoidance.

Remember the Laffer curve works!!!!

[Denis Cooper]

"Pensioners on 40% tax" - not too many of them around, I think.

[Denis Cooper]

Andrew,

As far as income tax is concerned, the illogicality is to aggregate earned and unearned income for tax purposes - there is a need for a separate personal allowance for income from savings and investments.

As far as capital gains tax is concerned, the illogicality is that gains which have built up over many years will be taxed in the year when they're realised, without being able to offset them by unused annual allowances from previous years - it should be possible to roll over unused annual allowances for use in future years.

[davyboy]

Folks, I work my butt off to earn a decent wage then pay a small fortune in income tax, NI, VAT etc... I really wouldn't take kindly to a cut in inheretance tax, which essentially taxes windfall gains, without substantial reductions in the taxes the rest of us pay, which are clearly not going to happen any time soon.

Wake up! Most people in this country will NEVER pay inheretance tax. A manifesto commitment to abolish it would inevitably result in us beign portrayed as a party of the rich, for the rich.

Surely DC & GO can't be that daft - however much their loaded mates are lobbying them.

[esbonio]

Andrew

I am not sure I understand all your posting but I do think much of what you propose is as complicated if not worse than the current system. Also why do you want focus groups and polls? Since when have they done the Tories any favours?

And I am afraid I cannot agree with you that "tax payers are ignorant"; I think everyone realises that they have been stuffed by fiscal drag and government wastefulness but whilst the economy is still going Brown gets the benefit of the doubt.

If when you say that pensioners and savers need other breaks are you conceding your proposed changes are to their detriment and if so how would you alleviate their situation in a transparent way so they were not elcectorally unpopular and in an fiscally efficient way?

Denis at 12.22: I do not know how many 40% tax pensioners there are but in order to pay 40% income tax i think it cuts in about 34K which on a two thirds final salary implies a finishing salary of 50 odd K or less if there is any investment income to take into account which is half the income figure (100K) generally bandied about for higher rates.

My Welsh mother used to quote to me a saying in Welsh that went something along the lines of "Everyone hs their finger where their on sore is"and I guess it applies to tax as much as anything else but FYI I am not retired.

If this site wasn't in English I could be mistaken for thinking I was in some kind of Scandinavian social democrat parallel universe sometimes.

[Tired and emotional]

Denis Copper @12.29 is right about earned and unearned income being the key to a merged income/ni tax. Inheritance tax should just go altogether, or be reduced to a flat rate of 10% as in most other countries worth the name. It's an insane tax, by what right does government take again from that those who have already been taxed?

Just because a tax is aimed at the rich does not make it worthy or sane or morally right. Scrap it altogether is my humble view.

As for Osbourne not leading the charge on tax, I think this is sensible, it's not until the other parties are falling over themselves to sell tax hikes on the rich and fiddling about at the margins for everyone else that we can actually go in as hard as we need to on tax.

Personally I'm with the TPA - halve both rates of corporation tax, scrap IHT, make tax credits payable only to those in work along the lines of the CPA paper, and start reducing rates for individuals over time. Also, convert most of the job seeker's allowance into food stamps and stop paying the cash element to anyone that has been out of work for five years. It's a basic safety net not a lifestyle.

[Rick]

Just exempt the primary residence from IHT and abolish CGT on inherited Stocks and Shares.......and levy any IHT on recipients not donors.............and the bulk of the problem is solved.

[William Norton]

did that turn off the italics?

[Tired and emotional]

bravo

[Denis Cooper]

"... by what right does government take again from that those who have already been taxed?"

But the government is not doing that. IHT is a tax on the estate of the deceased, not on the deceased who is legally incapable of owning anything or being taxed.

If it could be said that in effect any person or persons living or dead are being taxed, IHT is a tax on the living beneficiaries of the estate, not on the deceased.

If as I would prefer it was levied on the legacies actually received by each of the beneficiaries as individuals, rather than on the entire undistributed estate of the deceased, then that would be much clearer.

[sjm]

Denis seems to think there aren't many pensioners paying 40% tax - think again! The combination of husband's pension and my own (both State - no private ones)is not enough to live on, but takes us out of non-taxable allowances. So husband does some parttime work which is indeed taxed at 40%.

[William Norton]

Good. That's fixed the italics. The tax system should be plain-sailing.

On the abolition of IHT, this isn't where I would start a reform of the tax system - but there are cleverer ways of abolishing it without actually abolishing it.

The major problem with IHT is that it is more or less avoidable - if, as the saying goes, you trust your family more than you trust the Inland Revenue. A lot of estates are being caught at the lower end because of house price inflation - and once Granny's gone it's too late. I wouldn't exempt main residences (too much of an opening for tax lawyers; the Polly Toynbees of the world will point out that exempts places like Blenheim Palace), I'd go for an aggressive annual raising of the threshold to the point where the revenue withers away.

An idea I used to float in the dim past was to link IHT to receipt of new public honours - knighthoods taxed at 5%, peerages at 10% etc. With the changes to the H of Lds this is less defensible but if it were confined to estates held by the recipients of NEW honours it becomes in effect a vanity tax on Tony's cronies.

Re: combination of income tax and NI - how do you deal with contributory social security benefits?

[Dinah Glover]

Whilst I agree with inheritance tax being reviewed and substantially reduced, I would put Stamp Tax before Inheritance Tax in the rankings of unfair taxation. It is the tax which really affects the hard working Mr & Mrs Average. Not only does it skew the housing market and make it less flexible, but the most important point is that it is in the main taxing money that has already been taxed and whilst we are still alive at that!

[Tired and emotional]

I don't care what anyone says about IHT being levied on estates not on people. Surely the animating principle is that any estate scraped together after Income Tax, CGT, VAT, Stamp Duty (good point Dinah), NI, etc, etc, have all been levied throughout life should not be subject to a 40% after-death levy over some arbitrary level.

If I want to leave money to my children or grandchildren I have earned the right to do so without interference from the state. That's why I paid all the bloody taxes in life. It may be a 'windfall' for my kids, so what? Doesn't give the state the right to appropriate any of it.

[tapestry]

Chad - don't be so negative. Anyone can make money any time if they really want to. If you set up in business and add 20% progressively each year to your sales, you double in 4 years (100,120,144,172,206) quadruple in 8 years, 8 X in 12 years, and 16 X in 16 years.

If, for example you do £200 a day in year one, at only 20% a year growth rate, you will be doing £3200 a day in year 16. You will turn over £800,000 on maybe 20-30% margin, be a millionnaire and be in the top 2% of earners. It's not difficult, just bloody hard work, and your life will become one dimensional while you do that.

Why bother subjecting yourself if as soon as you try to move on and sell your business into cash, you are hit by first CGT and then IHT.

The reason people don't bother to become wealthy is a/because it's hard, and b/ because of tax.

People don't build businesses in Britain. They buy houses and wait for the easy returns. The tax breaks shouldn't be on the houses for that reason. They should be on business gains. But curiously all the support is for the other way round.

In times of our greatest crises in the past we have been saved by dynastic families. Asquith constructed our victory in WW1. Churchill in WW2. How would we have done if the Asquiths and the Churchills had not been permitted by taxation to release their sons to dedicate their lives to public service?

If Blair wasn't such as skinflint taking his payoff from Murdoch, and Cherie from whoever, not to mention all their cronies getting their fingers into every pie from Prescott, Mandelson, and so on, we would have been less ripped off in the last 9 years than we have been.

Why the hell does everyone want to see private money which could serve them well as it has in the past, handed over to fatten up more John Prescotts and create a bloated corrupt class of grasping politicians and their cronies?

Dynastic families are a precious resource. Other countries create the leading figures, the best innovations, and world beating businesses. Britain is locked into the negativity of house-buying and tending the garden. Set the entrepreneurs free. Build dynastic wealth in Britain. We need it.

[DavidTBreaker]

Here's a reform - Abolish It!

It is a fundamentally wrong tax, implying that property belongs to the state and is thus reclaimed by it after death; the deceased person’s past ownership being effectively reduced to a lifetime lease. This is entirely wrong. Private property is private property, to be handed down as seen fit. No part of it belongs to the state, and the state should have no claim on it.

On top of that, it is a disgusting thing to do (tax dead people and force relatives to sell their property to pay it).Here's a reform - Abolish It!

It is a fundamentally wrong tax, implying that property belongs to the state and is thus reclaimed by it after death; the deceased person’s past ownership being effectively reduced to a lifetime lease. This is entirely wrong. Private property is private property, to be handed down as seen fit. No part of it belongs to the state, and the state should have no claim on it.

On top of that, it is a disgusting thing to do (tax dead people and force relatives to sell their property to pay it).

[esbonio]

I agree with Tired and Emotional. However it is open (admitedly provided you live long enough) to make lifteime gifts in ordwer to avoid IHT though assiduous readers of the above posts there is even support on this thread forgifts to be taxed. The Tories are/were meant to be the party inter alia of the family.

And just a further thought on the tax treatment of pension income. I seem to recall that pension contributions are deducted from gross income i.e. they are not subject to income tax until the pension is paid out. I believe NI contributions however are not deducted from gross income for tax purposes i.e. NI has already been paid in advance of the the pension being paid out. To apply NI to the pension which is subsequently paid would be double taxation. Do correct me if I am wrong.

[James Sproule]

We all seem to be agreed that raising the threshold is a good idea. This will naturally mean that the amount IHT raises will fall (which I am not against). But we are then left with a tax that raises little money and leads to considerable avoidance and wasteful tax planning. At that point the only reason for not abolishing is because we are afraid of the political consequences, and somehow that is preferable to allowing the bureaucracy to continue. Is this really the sort of government we want to be?

[Tam Large]

Osborne and the Party are complete fools if they do not commit to abolishing this iniquitous and unfair tax, which penalises saving and fosters a selfish "live-for oneself" mentality. Inheritance Tax is utterly contrary to all Conservative principles of fairness and family values.

If we don't adopt this policy, they what on earth DO we stand for. There should be no question and no delay - the fact that our Leadership is dithering on this clear and simple flagship issue is deeply troubling.

[Denis Cooper]

sim, I've no desire to pry, but the 40% tax rate cuts in at £33,000 taxable income, after a personal allowance of £5035 minimum, equals £38,000 minimum total:

http://www.hmrc.gov.uk/rates/it.htm

and a single person's full state pension is around about £4500, so any pensioner who is paying 40% on part-time earnings must have a good line of work! :-)

[Roger (Chuck) Berry]

I suspect the abolition of IHT will be the precursor of a tax based on the income of the recipient of such benefit or legacy.

It makes absolute sense that a spouse should inherit wihtout tax but it does not makes sense that a family with 6 children should have the same IHT level as one with one sole recipient of the estate. The £285K limit set on the estate value is, in my view, wrong it should be based on the recipient (who benefits). Say a tax free sum is acceptable the rest taxed at the relevant IT levels. Treated rather like the lump sum figure for redundancy of £30K bu thte figure here should be say £80K. Listen I am no research Guru so the net take should remain as is we simply cannot afford to kiss goodbye to £3.5 Billion even though this is only 1% or so of revenue. Inheritance paid to pension finds could have different non taxable treatment (within pension top up guidelines).

Of course people will try to bucjthe system as they do now but we should target this tax to remain revenue neutral.
Chuck

[Laughing Cavalier]

Of course we can afford to kiss goodbye to the revenue from IHT. NuLabour squanders more than that every month by its incompetence. Stopping the loss of £5 bn a year in overpaid tax credits would be a start. Stopping the huge gift to organised crime from failure to stop VAT Carousel fraud would be another and there would be huge amounts of cash left over for proper expenditure like reversing the Defence Cuts and the stealth tax on pensions. Those are just a few examples.

[malcolm]

Chuck, 'I'm no research guru', I would jolly well hope not! You do write some very good songs 'though! Didn't think 'My ding a ling' was up to much however though I'm sure the royalties will take care of the IHT .

[George Hinton]

Seems quite clear that Osborne will have to go back to the drawing board and come back with something a little more positive on the whole structure of taxes in the UK, corporate as well as personal.
He should also apply himself to assessing as to just how much waste we have had under NuLab, which would put a new tax regime into context for all.

[Yet Another Anon]

Reforming it is a waste of time, the focus should be on bringing the public accounts back into surplus and that achieved then it would be as well just to scrap it, at £3.6bn in a situation in which the Public Accounts were brought into surplus the cost could be absorbed easily and painlessly, this means beginning to reverse many of the increases in social spending that there have been over the past 100 years so that other taxes too can be abolished or reduced, some rationalisation of Income Based taxes bringing together Income Tax and Capital Gains Tax into one system with a single threshold not payable by people with less than average earnings and with a lower rate chargeable on taxable monies.

[tapestry]

scrapping IHT would cost nothing.

the money will stay in private hands where wealth-creation and economic activity will make it grow, instead of going into the public domain where it will be lost.

3.6 billion of capital staying in private hands each year over a generation is £100 billion - £30,000 for every member of the working population - raising output of the economy across the board so that extra VAT (or local sales tax if VAT abolished) corporation tax and income tax receipts will be far in excess of 3.6 billion.

[Steve]

Exactly.

At the risk of constantly repeating myself - the tax raises peanuts in relative terms, takes up pages of tax code, is avoided by the wealthy, provides a huge amount of work for accountants and solicitors and costs a fortune to collect and administer.

Let's have the courage of our convictions and abolish it.

Would any party ever re-introduce it? Doubt it.

[Rick]

How would we have done if the Asquiths and the Churchills had not been permitted by taxation to release their sons to dedicate their lives to public service?

Asquith's firstborn son was killed on The Somme...........Randolph Churchill......I wonder what public service he rendered.......

The simple point is that when ordinary people lose their family home upon death it is expropriation.............and when billionaires like Hans Rausing can pay for Oliver Letwin's private office and pay no Income Tax in the United Kingdom it is a disgrace

[Fred]

You could raise the IHT threshold to 500k, which on recent form would exempt about two-thirds of the estates caught but only sacrifice 25% of the revenue. Exempting the main residence would be a bit more expensive, sacrificing about 40% of current revenues.

[tapestry]

When Henry Asquith lost his firstborn Raymond on the Somme, he was heartbroken and was unable to fight back against Lloyd George, t6he spin-meister and Northcliffe, the Press Baron and lost the Premiership. His two other sons fought throughout the war, one ending up as a general - and inventing commando-style tactics.

As for Churchill, I was hoping you might look at the deeds of one Winston Chruchill who saved Britain and the Free World, or the Duke of Marlborough rather than the Randolph.

The fact is that your family will do better if you work hard and build up capital during your life time, as will anyone else's. There are also families which have the ability to offer far more to their country if their capacity is expanded with inherited capital. The Spitfire was developed by private money for the Schneider Trophy, for example.

[tapestry]

error in my stat's.

over a working life - estimated at 45 years - and using projections of higher take for IHT due to fiscal drag, and G.Brown's new 6% trusts tax, the figure for private capital that could be gained by eliminating IHT per member of the working population is potentially £30,000.

Investing £30,000 per member of the working population could raise productivity of British industry to compete with the USA.

Eliminating IHT would therefore not cost anything. It is costing us. Maybe one fifth of our potential productivity, by reducing our private capital base.

In the hands of ambitious young inheritors, capital is highly productive. In the hands of Brown, Prescott and Blair, scone.

[David Belchamber]

"Unfortunately tax payers are ignorant. Gordon Brown knows this better than anyone else. The only way we can reinforce the message that we are in a high tax, wasteful spend regime, is for people to see it in black and white every week.

Simplyfing tax to one higher tax rate, puts the focus back on tax cutting in budgets as a vote winning issue, as it was in the 80's".

I think it is crucially important, as Andrew Langley says @ 12.21, that we make sure that the electorate knows exactly what Gordon Brown is currently taking from tax payers.
This is a presentational issue which I believe needs highlighting at regular intervals from now on.

Esbonio @ 12.09 raises a very different aspect of the same point: what would the tories then do about it?
"Merging NI and income tax would also have to deal with the fiction that it pays for national health and the state pension".

We all know that NI is a tax and that the state pension is not funded.
Some have pointed out that pensioners would be at a disadvantage if the two were merged, because they don't pay NI at the moment.
If NI were to be merged with IT, the tories could appear to reduce the merged amount by keeping x% as a quite separate "pension contribution" (which of course would cease when a person started to draw the state pension).
An adjustment/allowance would have to be in respect of the balance of the NI contribution made to see they were no worse off than at present.

[Denis Cooper]

All this talk about dynasties. Not my idea of a society where the lowborn can rise to the heights through their own merit, while the highborn can fall through their own indolence. Not my idea of a society where each individual stands on his own two feet to the greatest possible extent, rather than relying on inheriting wealth from mummy and daddy. Not my idea of a united society, where the dustman's son may marry the daughter of a millionaire, and where families are intertwined irrespective of their wealth and the boundaries between classes are so fluid that they intermingle and are bonded together in one nation. Not my idea of a society where people are respected more for what they've achieved through their own hard work, than through what their father or grandfather achieved.

[Yet Another Anon]

We all know that NI is a tax and that the state pension is not funded.
There is a difference between National Insurance and Income Tax in that NI is a weekly payment based on weekly earnings of those under Retirement Age whereas Income Tax is an annual tax, either National Insurance needs reforming so that people actually get something out of it for the money they put in (something supplemental to what they would get anyone not merely an alternative route to the same level of payments as if they hadn't paid anything), scrapping paying the NI stamp for Students, the Disabled, Single Mothers and people on JSA might be a good start towards this and if there is going to be State Funding for the NHS perhaps rationing according to people's NI record.

[tapestry]

Not my idea of a society where the lowborn can rise to the heights through their own merit (Dennis Cooper)

You've bought the socialist concept that private wealth is bad, Denis.

It is easier for people to rise as you put it in a diverse economic environment than a monoculture. If all monies and wealth=power are in the hands of the government, large corporations and so on, then people have little choice but to conform and become wage slaves.

There is a big void in the investment picture for small businesses that want to start up and grow. They cannot raise the money they need from banks, or from financial institutions that need the deals to be larger. They are thrown onto the 'dragons in the den' and made to sweat on TV - or forget it.

If there was more private wealth, people could raise private equity from local investors who could minitor and assist - business angels would become more prevalent. A whole new world becomes possible once you open your mind to it.

Don't worry about indolence, Denis. Nature's socialism ensures that most fortunes are wasted by succeeding generations, tax or no tax. All tax does is ensure that the potential good from private wealth which would have changed the world are legislated out of existence and given little chance. Empires rise and fall throughout history. IHT makes sure they fall as soon as they've even risen, and stops the drive to rise.

The greatest force for evil in human affairs is jealousy. Denis is demonstrating his dislike of the fact that families with money can do more for society than government employees with money.

Thank God Cameron does not agree with him. Banish jealousy from your thoughts, Denis. You're stealing opportunity. You don't have the right.

[Chris D]

Dinah Glover@13:26 "Whilst I agree with inheritance tax being reviewed and substantially reduced, I would put Stamp Tax before Inheritance Tax in the rankings of unfair taxation. It is the tax which really affects the hard working Mr & Mrs Average. Not only does it skew the housing market and make it less flexible, but the most important point is that it is in the main taxing money that has already been taxed and whilst we are still alive at that!" Dinah Glover@13:26
I agree with you there Dinah.
Stamp duty and tax thresholds affect more people so should be more of a priority when affordable.

[Chris D]

Sorry, should have said income tax thresholds.

[Richard]

"All this talk about dynasties."

They've existed throughout history.

"Not my idea of a society where the lowborn can rise to the heights through their own merit, while the highborn can fall through their own indolence."

So you're saying you want the government to socially engineer your sort of society? Personally I like the idea of a society where the government generally leaves people alone.

"Not my idea of a society where each individual stands on his own two feet to the greatest possible extent, rather than relying on inheriting wealth from mummy and daddy."

If they want to rely on mummy and daddy then so what? This "mummy and daddy" nonsense could come stright out of an SWP pamphlet. Rich parents pass their wealth onto their children. So what? In many cases they have earnt the money and so by your terms have the right to do what they want with it.

"Not my idea of a united society, where the dustman's son may marry the daughter of a millionaire, and where families are intertwined irrespective of their wealth and the boundaries between classes are so fluid that they intermingle and are bonded together in one nation."

There has always been intermingling between classes throughout history. True, it might not have been on a large scale but that is the business of the people choosing whether or not they want to intermingle.

"Not my idea of a society where people are respected more for what they've achieved through their own hard work, than through what their father or grandfather achieved."

I think the Tories have better things to do than lecture people on who they should and shouldn't respect.

[John G]

Scrap IHT.

Introduce a flat rate income tax.

Can anybody seriously quarrel with these 100% Tory policies?

[Tam Large]

I have just seen that Ozzy Osbourne has been voted "UK's Silliest Celebrity".

For abandoning conservative policies such as low taxes, repeal of Inheritance tax, and for rejecting a flat-rate income tax: I nominate George Osborne as UK's silliest politician.

All this failure to act, just when Labour are sliding down the pan and our population are being taxed to extinction every which way. How can anyone take this light-weight man seriously?

[John G]

Ha!Ha!Ha!Ha!

But seriously, I'm inclined to agree.

I admit I have other reasons for disliking Osborne but I look forward to the inevitable day when David reshuffles him to some more suitable role.

Something like Shadow Minister for Tourism

[Mike Christie]

A good tax should be universal, unavoidable, simple to administrate and levied at a low enough rate to be unobjectionable.

IHT is selective, avoidable, complicated and at such a high rate that people have to sell their family homes to pay it.

As the inherited 'old money' has dwindled in this country (due in large part to successive generations being clobbered for IHT) and now most inherited wealth has been earned and taxed already there really is no justification for this painfull (emotionally and financially) tax.

The amount raised is miniscule, as has already been pointed out further up the thread, cutting back on just one area of fraud would make up the shortfall.

There is no justification at all for us not to pledge to scrap this tax.

HOWEVER, to do this as our first solid pledge on taxation could be a PR disaster. 'First Tory promise : Tax Cuts for the Rich'...

We must first pledge to massively raise tax thresholds to take low-earners out of the tax system altogether, scrapping tax credits in the process.

[Londoner]

"Not my idea of a society where each individual stands on his own two feet to the greatest possible extent, rather than relying on inheriting wealth from mummy and daddy." says Dennis Cooper.

These comments seem to mark Dennis out as an egalitarian extreme individualist, which is not a Conservative position either historically or, I am glad to say, currently, with David Cameron's emphasis on voluntary and family support networks being strenghtened to take the burden off the State (see poverty discussion). Dennis, Conservatives have no problem with helping our fellow man, we just think it's better done privately, including within the family. Presumably, if he were well off and had a family member in dire straights (or perhaps wanting finance for a business they were starting or to enable them to remain in academia to do research), he would tell them to stand on their own two feet. Conservatives also think that the more rich people there are, the more the power of the State as the monopolistic investor and philanthropist is diluted. I am surprised this has to be spelt out amongst Conservatives.

We also believe in a dynastic hereditary monarchy, in case you have not noticed.

Incidentally, one effect of more private wealth, not so far mentioned anywhere in all these discussions, is the possibility of more private endowment of Universities. But perhaps Dennis would be against that on the grounds that there might be more rich/successful graduates of Oxbridge Colleges than from lesser institutions, and that might be inegalitarian.

[Denis Cooper]

What a load of nonsense!

It's hardly egalitarian extremism to suggest that a person who benefits from a large legacy or a series of legacies, in return for no effort, might be expected to pay some tax above a certain limit.

Such a soft approach would never appear in a SWP pamphlet - they would go at least for an annual wealth tax on the living, if not the immediate seizure and redistribution of their assets.

Have I supported the suggestion Gordon Brown made some years ago, in an earlier incarnation, that all estates should automatically "revert" to the state?

No, I've said that it's natural and healthy for people to want to pass on whatever they leave behind to their children, and that people should not be discouraged from saving for their old age by the prospect that any surplus would be seized by the state.

But tell me this - why should everybody who is working hard for their living, most of whom will inherit little or nothing, have to pay even more tax on their earnings so a favoured minority can inherit their parents' houses free of all tax?

Let me pull up this posting yesterday from davyboy, because this exactly how most people outside that minority would react, and quite rightly too in my view:

"Folks, I work my butt off to earn a decent wage then pay a small fortune in income tax, NI, VAT etc... I really wouldn't take kindly to a cut in inheretance tax, which essentially taxes windfall gains, without substantial reductions in the taxes the rest of us pay, which are clearly not going to happen any time soon.

Wake up! Most people in this country will NEVER pay inheretance tax. A manifesto commitment to abolish it would inevitably result in us beign portrayed as a party of the rich, for the rich.

Surely DC & GO can't be that daft - however much their loaded mates are lobbying them.

Posted by: davyboy | August 23, 2006 at 12:31"

[Richard]

"But tell me this - why should everybody who is working hard for their living, most of whom will inherit little or nothing, have to pay even more tax on their earnings so a favoured minority can inherit their parents' houses free of all tax?"

We're not calling for other taxes to rise to cover the cut in inheritance tax. We believe there's enough money that can be saved to afford it. Plus we'd cut out the bureaucracy necessary for the collection of an entire tax.

"Wake up! Most people in this country will NEVER pay inheretance tax. A manifesto commitment to abolish it would inevitably result in us beign portrayed as a party of the rich, for the rich."

Thanks to rising house prices many people in average semi-detached houses are facing the threat of inheritance tax, notably in the South. It won't just be the rich who get shafted by this. Unless I'm mistaken it tends to be those in average semis who can decide an election in marginals.

[Denis Cooper]

Just taking the present nil rate band of 285K and comparing that with current average house prices as quoted in:

http://money.guardian.co.uk/houseprices/story/0,,1839834,00.html

The north: £137,861
The north-west: £146,601
Yorks and Humber: £147,230
Greater London: £317,679
Wales: £149,063
West Midlands: £164,576
The south-east: £236,915
The south-west: £205,768
East Midlands: £156,243
East Anglia: £181,925
Scotland - not listed, but will be low

Only in London will more than half of the houses automatically take the estate above the nil rate band, and it's less than half even in the south east. There are swathes of the country where only a small proportion of the houses would be worth > 285K. Then there's the third of the population who don't own their homes, and a smaller number who will die leaving a mortgage on the house - possibly through some equity withdrawal scheme. It's easy to see that the Treasury could well be right to claim that IHT is only paid on 6% of estates, and outside London most of those are probably in safe Tory seats.

[Chris D]

"We're not calling for other taxes to rise to cover the cut in inheritance tax. We believe there's enough money that can be saved to afford it. Plus we'd cut out the bureaucracy necessary for the collection of an entire tax."
Richard, although I think that INT is unfair, I cannot accept that it is a priority case compared to council tax, stamp duty or income tax thresholds. Added to which we are going to have to do something to encourage people to save for a pension.
You are in effect asking the majority to continue to pay their present levels of tax for longer so a minority can "inherit" more.
IHT is unfair but so is everyone else's tax burden under this government.

[Richard]

"Only in London will more than half of the houses automatically take the estate above the nil rate band, and it's less than half even in the south east"

But those are just figures for house prices. They don't take into account the fact that the inhabitants of these houses have other assets they may wish to pass on. It is usually these assets combined with house prices that force people over the limit. Furthermore house prices are continuing to rise. IHT may be a relatively small problem at the moment but could cause more harm in years to come.

"You are in effect asking the majority to continue to pay their present levels of tax for longer so a minority can "inherit" more."

Seeing as savings in government expenditure have been estimated at between 30 and 80 billion we could abolish IHT and capital gains tax and cut other taxes. The point about IHT (and CGT) is that they bring in such a tiny amount that the money spent on enforcing them brings in a disproportionately small return.

I do agree though that getting rid of IHT and leaving other taxes alone doesn't look good politically. Its abolition should go hand in hand with a raft of other tax cutting measures.

[Denis Cooper]

Well, the Treasury says that the revenue is equivalent to 1p on income tax or 18p a litre on petrol. Personally I think a 1p cut in tax paid on money which a person has earned for himself would be both fairer and more popular than abolishing IHT for the benefit of a small minority.

The Treasury also says that inheritance tax only affects 6% of estates, which probably means about 8% of households, bearing in mind that it's rare for IHT to be paid on the estate of the first spouse to die, but in some cases even without that exemption the estate of one spouse on its own would not be large enough to attract IHT, and some people are not married or a widow/widower when they die.

But it remains the case that most of the IHT is paid in constituencies which already have Tory MPs, and the net electoral effect of a promise to abolish it is likely to be quite negative across the rest of the country. On the other hand, a promise of make sensible reforms so that it's both fairer and simpler wouldn't have the same negative electoral effect.

It may be worth pointing out that under the Irish system where the tax is levied on the beneficiaries, not the estate, at present a child is allowed to receive 478,155 euros in gifts/inheritances from his parents without paying any tax. That converts to £324,000. So in the absence of any significant lifetime gifts, if the estate passes to just one child, there will be no tax if it is below £324,000, and if it is divided equally between two children there is no tax if it is below £648,000, etc.

[Mike Christie]

Denis, as a Conservative, I believe that the state should raise a bare minimum of taxes to provide essential services and functions that can not be provided privately and to make sure that the vulnerable in society are cared for properly.

I don't believe that the state has any divine right over my property, and I certainly don't believe that the state has the right to add up all my possessions on death and help themselves to 40% of it.

You however seem to take a socialist viewpoint that the state has every right to confiscate as much of my property as it damn well likes and distribute it as it will.

The Today programme a couple of days ago had a message from a listener who summed it up well. When he got married in the 40s, he had £10 in his savings account and the clothes he got married in belonged to the King. Everything he has accumulated since has been bought and paid for out of taxed income. By what right should the state be able to take any of this on his death?

Those average house prices don't tell the whole story, in the north west for example, there are many areas where you would struggle to find a house under £250,000 (huge swathes of South Manchester for example, key marginal seats like Cheadle) but banks and banks of cheap terraces in Manchester, Liverpool and all the former mill towns keep the average price down.

Let's remember, IHT raises less than £4 billion (not counting what it costs to administer), less than 1% of revenue. Are we really so impoverished of ambition that we aren't confident of being able to claw that back in efficiency savings elsewhere?

[michelle]

I have just become a victim of fraud via the internet You need to be sorting security out and these people need locking up and throwing away the key my partner really believed he had a good job we aare now about to become parents only to be told the payments we recieved from his "JOB" WAS FRAUDULENT NOW I HAVE NO BANK ACCOUNT AND CONSTANT WORRIE OF WHATS GOING TO HAPPEN ITS NOT FAIR really isnt