Only millionaires will pay inheritance tax under a Conservative government

More soon.  Click on the image on the right to enlarge the leaflet that was distributed immediately after George Osborne's well-received speech.

1.40pm: Mr Osborne's plan to lift the inheritance tax threshold to £1m was announced this morning to rapturous applause from Conservative Party members.  This is "the death knell for death taxes," he declared.  It is the third big tax and spending policy announced by the Conservatives that grassroots activists will look forward to selling on the doorsteps.

We've also had the abolition of stamp duty for first-time buyers on all homes up to £250,000 in value.  There was also Saturday's promise to abolish the penalty that penalises 1.8 million two-parent families raising children.

None of these tax cut promises will be funded by the proceeds of growth, however.  They will be funded by a combination of savings from welfare budgets and from a new £25,000 once-a-year poll tax on  businesspeople classed as "non-domiciled" in the UK; non-doms.

Speaking on Radio 4's World at One, Oliver Letwin conceded that many of the savings would only be delivered progressively - over a number of years.  This could mean some delay in full delivery of the tax cut pledges.

8pm: This from Matthew Elliott at The TaxPayers' Alliance: "When taxpayers listen to George Osborne's speech on TV tonight, they'll be very pleased with what they hear. It contained some excellent announcements. The flat fee on non-doms makes the package add up, but before it's implemented in practice, I think the Conservatives should look very carefully at whether it could drive the entrepreneurs out of the country who are making London the world's financial centre and keeping our country afloat."

Comments

[EML]

I didn't get chance to see Osborne's speech, but the content looks excellent. I particularly like reducing the number of first-time buyers who will pay stamp duty. That will save some a few thousand quid.

Also very clever to partly pay for it by increasing taxes (if only a little) for non-domiciled people. Hardly any of them will sniff at a £25,000 flat fee for registering, and it makes Brown look an idiot for not doing anything about it before.

It's all coming together quite well; a little something for everyone to be happy about: tax cuts for homeowners and families, but tax increases for polluting airlines and the super rich.

[passing leftie]

6% of estates are affected by inheritance tax - the wealthiest people in the country. The people who pay the tax are middle aged, usually wealthy, and are paying the tax out of a lump sum they are receiving in addition to their own assets.

If you want to make tax cuts, and I understand the Tory argument for them, is this really the place to look? Wouldn't you rather cut the tax for people who are still alive? Or is it simply another case of tax breaks for the rich, more taxes for the poor?

[Arthurian Legend]

Of course, if three children inherit their parents' home worth £1.2m, they will pay inheritance tax on £200,000, despite the possibility (likelihood) that the children may not be millionnaires.

[grammar school boy.]

Quite absurd to prioritise a tax cut to people inheriting £1 million pound homes over taxing income.

Further evidence that these Bullingdon boys are quite out of touch.

Eton for them but no grammar schools for us.
£1 million tax free inheritance for them, 41% tax for those who have to earn a living.
Tax on your family holiday for us, free stay at a relatives country estate for them.

[Mike Christie]

It isn't a tax cut to people inheriting £1 million pound homes, its a tax cut to people inheriting £290,000 homes, which with the way house prices are going which will bite more and more families in 'normal' circumstances.

Passing leftie, I'm not quite sure how GB invented that 6% figure, but do you really think that only 6% of uk homes are worth more than the current threshold of £285,000.

There are plenty of parts of the SE where that would only buy you a flat or an ex-council semi.

[Mike Christie]

Grammar school boy... the Grammar school has been off the agenda for many years. Even the blessed Margaret, at a time when she was dismantling and rebuilding the country wholescale didn't bring them back. The idea of the current leadership not bringing them back is hardly the u-turn its presented as.

[Jon Gale]

passing Leftie,

"6% of estates are affected by inheritance tax - the wealthiest people in the country."

It is clearly not 6% - the current threshold is £300,000, the average detached house nationwide is £323,332, in the south east it is £425,072.

http://news.bbc.co.uk/2/shared/spl/hi/in_depth/uk_house_prices/regions/html/region9.stm

This 6% figure is pure rubbish and more spin from Brown.

[Arron Fitzgerald]

Finally a policy to get excited about. I'll take the politically palatable increase in the IHT threshold to £1m (funded by a flat-rate levy on 'non-doms') as a ‘down payment’ on the gradual abolition of the tax. I despair at other commentators on this page who believe that reform of this tax should not be a priority. Anyone who believes that a substantial portion of a person's legally accumulated, post-tax wealth should be confiscated by the state upon their death is a communist - no ifs, no buts, end of story.

[John Craig]

Good speech . . . what I saw of it.

The BBC cut a lot of it on BBC Two at lunchtime, showing just the highlights - and at every key announcement panned the camera on parts of the audience who were not applauding with the main body of conference.

The commentators seem a bit frustated that no-one is rising to their biased bait about splits and who will succeed David Cameron.

You never know - it may be someone from the 2007 intake of Conservative MPs!

[Rob Largan]

Osborne's speech was excellent, much better than expected. He appeared serious and responsible and for the first time we are looking like a government in waiting.

[Chad Noble]

Er Jon and Mike,
It's not the gross house price but the net wealth that is liable to IHT.

You've got to take outstanding mortgages, loans, credit card debts etc off that house value.

[michael m]

How do you define a "first time buyer" ?
A couple can buy a home each? Divorced people etc trying to get back on the property market?
There are a lot of anolomies here to be sorted

[Raj]

I'd vote Tory on these promises - stamp duty will be a horror for me under current regs. Even worse, when my parents do eventually die I'd have to get out a 6 figure loan just to pay IHT! They're not cash-rich at all, just have a house that has gone up in value. What would happen if I can't sell the house, Gordon - flog it for a knock-down price or pay the massive interest rates out of my pocket?!

I think £1 million is fair. It will ensure everyone can leave one house to their kids without fear of massive tax bills and will encourage a prudent retirement - saving will have good results even if you don't need it all. Whereas at the moment Gordon doesn't mind if someone blows all their assets on luxuries and then comes cap in hand to him asking for benefits as they have nothing - crazy!

[Mike Christie]

Fair point Chad, but a very large number of homeowners in the sort of age-group who are most likely to die will have bought their homes 20 or 30 years ago and paid off their mortgages.

[Mike Christie]

Just to put it into context... I wonder how many people bought their council houses off Mrs T. and are now liable for IHT...

[Londoner]

I absolutely agree with Arron Fitzgerald: "I'll take the politically palatable increase in the IHT threshold to £1m (funded by a flat-rate levy on 'non-doms') as a ‘down payment’ on the gradual abolition of the tax."

This is very good news and, together with the stamp duty pledge, will play particularly well in London. After his excellent speech yesterday, Another Boris Boost (ABB).

My understanding of the stamp duty pledge is that it applies to all properties up to £250,000, so I don't think one needs to get into contorted definitions of first time buyers.

[Ken Stevens]

Spencer Wisdom | October 01, 14:12

Dispenser of Wisdom indeed!

The house I struggled to buy for £120K is now worth in excess of £400K. Combined income of my wife and me is around the national average salary for one person. My kids on below average salaries might well have to wait for us to snuff it before being able to get on the housing ladder themselves. Even though we might well downsize beforehand, in order to pass over some cash to them, that money would still reckon as part of our estate for computation of IHT if we negligently fail to last seven years beyond.

IHT certainly does not just hit the well-off and I welcome the intention to increase the threshold significantly.

[HF]

I was not in favour of this because I do not believe it is a Net vote winner. Particularly in the Midlands, North, Wales and Scotland.

We will see if the Mail and Telegraph finally stop all the attacks and back us.

[Chad Noble]

Hi Mike, yes I agree. IHT is, unfortunately, likely to become less of an issue with the passing of time as younger generations are saddled with larger debts, poorer pensions etc etc....

But good electioneering for today's older, relatively rich, voters, without doubt.

[Jon Gale]

If Chad is right then I apologise/withdraw my comment.

[Londoner]

Re mine at 14:28, actually having looked at the Party's official website, maybe he has said it is restricted to "first time buyers". This has the advantage of justifying a reduced figure for the stated cost but I am sure in practice it would have to come off all properties up to £250,000. For one thing this would discriminate against couples, unless if they were both first time buyers the limit would be £500,000?

[Adam]

IHT threshold change is a step in the right direction as is the abolition of Stamp Duty for properties up to 250K. However the non domicile tax might not yield as much money as estimated as these people might go elsewhere if their tax rate is raised. Not enough for me to swing an election but its a first step. May also be an Osbourne pitch for the leadership in worse case scenario???

[michael m]

Thank you Londoner- if there are no restrictions, the buy to let market will benefit as well, bearing in mind the majority go for the lower end of the market- but is this the purpose of the proposed cut in duty?

[Sean Fear]

6% of estates are *currently* attracting IHT. One reason it is not higher is of course down to IHT planning.

But if thresholds were left unchanged, then that percentage would rise very rapidly, given the rise in house prices over time.

[passing leftie]

Don't mix up the current value of property with the percentage of estates affected by inheritance tax. You have to die first.

The number of estates affected by inheritance last year was 6%. These are treasury figures. Can you point me at any other data?

The figure might go up a little, but so what? It specifically affects the wealthiest. Taking money from dead people seems like a pretty good idea. Wouldn't you rather spend it on income tax cuts for everyone?

Increasing the threshold just encourages house price inflation. My own view, which I'd be startled if anyone shares, is that IHT be based on the tax position of the person or organisation to whom the money is given, not the deceased.

Still, I suppose you should be pleased that I don't like it. It shows it's hitting its target market.

[Alistair]

So, The lurch to the right is now well under way

Perhaps someone will explain how increasing the IHT threshold will help the poor and the dispossessed?

It's the middle class Tories helping themselves all over again and it will be reported as such.

[Mark Fulford]

May also be an Osbourne pitch for the leadership in worse case scenario???

LOL! There are people who want Cameron's blood, but I don't think that George is who they have in mind to replace him.

In any event, the only thing worse than losing the next election would be to lose Cameron as a leader as well.

[jane]

What is particularly galling is that people's whose funds are stolen by the government under the so called 'inheritance tax' are paying for the policies such as the destruction of England which they do no agree with.

[Teesbridge]

Adam @ 1449h

Hard to see Russian oligarchs fleeing the Premier League Boardrooms for £25k/year - Mme Oligarch probably spends that in a week on shoes and bags. Neatly judged amount, I'd say.

[James Burdett]

Good policy, especially as more people fear IHT than will ever be caught by it. So in terms of appeal it is more electorally appealing than the cost of changing it.

[Deborah]

Mike Christie "a very large number of homeowners in the sort of age-group who are most likely to die will have bought their homes 20 or 30 years ago and paid off their mortgages."

-perhaps, but a fair number of them have had to remortgage their house to pay for residential care and/or hospital bills.

[Adam]

Teesbridge @ 15.15

The Oligarchs won't go anywhere but the average non domicile in the UK earns £100K and pays £26k in tax already, so this proposal will push their tax burden over 50%.

[David Cooper]

Exactly the kind of policy that will appeal to the thousands of Stay At Home Party supporters who might otherwise struggle to find a reason to turn out and vote for us as they had done in the past. You're learning, George.

[Chad Noble]

I guess the billionaire non-dom's only need to buy 10 apartment's a year costing 249,999 under the tory proposals to offset the non-dom levy and they'll have a nice additional portfolio of assets too.

[Traditional Tory]

In any event, the only thing worse than losing the next election would be to lose Cameron as a leader as well.

I think the two are inevitably to be bracketed together - unless civil war to the death is your chosen scenario.

Of course there is an argument for reducing the burden of IHT. Quite apart from the fact that I personally would be even wealthier than I am, it is transparently unfair that inflation has caused IHT to bear down on social classes whom it was bever intended to affect when Estate Duty was originally introduced.

But puh-lease don't let us go down the road of implying that this is a measure intended to help the helpless.

Already I fear that much of the triumphalist braying on this thread is of the type which will confirm in many people's minds that the party is totally out of touch with the majority of the population who do not pay IHT, even under the present system.

[Griswold]

Inheritance Tax. Cut the rate to 15% and the amount collected will double. That apart 1000's of lawyers and tax consultants will have to find better things to do.

[Mike Thomas (215cu)]

Well done George,

Whilst working, I read the speech. That was a ripsnorting.

Please, please more of the same, A clear alternative, plenty of attack and a bit of passion. There are so many people that want someone to stick it to this government badly.

Make the electorate take notice, show that you really want the job....

...and you'll get it.

[HF]

What happens if Brown simply steals the policy and does the same thing?

We then have a slogan of "Vote Conservative for a policy that the Labour Govt have already implemented", with millions of leaflets being printed today.

Afterall Brown has stolen many other ideas. So far Labour has chosen not to respond. If they call it "unfunded" then we know they do not plan to copy it straightaway.

[Mike Christie]

passing leftie, or any of the other lefties here...

A person works hard all their life, scrimps and saves, buys a house etc. etc. all paid for through taxed income. What possible moral justification is there for the taxman to help themself to 40% of it on their death?

We aren't talking about the landed gentry getting rich on the backs of peasants any more, just ordinary working people.

We have a strange attitude to property in this country. We throw our hands up in horror that a little old lady might have to move out of the big family house she's lived in for years because she can't pay the bills yet grumble about rising house prices. We worry about people not saving and living for the moment yet seem to think that its OK for the taxman to help themselves to £4 out of every 10 we might still have when we die.

Also (I'm looking at you Deborah) why is it socially acceptable to expect struggling young families to pay for one's healthcare
through tax whilst also having to try to make their own way, just to enable one to leave hundreds of thousands of pounds worth of assets to one's family. It should be the accepted norm that houses are sold or passed on when they are no longer needed. The reliance on state support has warped and perverted peoples expectations and sense of responsibility.

Its a complex and often emotional issue, but we have a very strange set of social norms regarding this in the UK and so many of the UKs problems stem from it.

[Londoner]

In the Notes to Editors to the proposals on the party's website, it states: "According to independent research by Scottish Widows, instead of 37% of households being caught in the inheritance tax net, only the top 2% would be affected."

This could be consistent with the "6% of estates" beloved of the socialists (in the context of IHT, I use the term "socialist" advisedly). I apologise for the length of this post explaining why the two figures could be consistent, and why the 37% figure is the more relevant one.

First, the Govt figures are backward looking - I am sure that they relate to some previous financial period at least a year or two out of date, and house prices (and share prices for that matter over the last 4 years) have been increasing fast.

Second, the people whose estates are being measured in the 6% figure were born on average in the early 1920s (dieing in their early 80s). Many of the 94% not paying IHT will have predeceased their spouses and so are not paying it for that reason. That age group also had a significantly lower proportion of owner occupiers than the one that followed, as the great rachets up in home ownership were in the 1950s and 1980s (look at the age profile of tenants in social housing to verify this). The next generation coming up has much more capital at age 55 than their parents did, even aiming off for inflation.

Third, it is true that many people whose estates are vulnerable to IHT now may not end up paying it because they may live to a ripe old age and need to spend much of their money in retirement, including on personal care (or have time successfully to pass it on to grandchildren etc). This highlights that the tax is as much a tax on early death, as on death per se. And yet early death is likely to make it all the more important that as much money as possible is able to be passed on. If a couple die aged 80 they are unlikely still to have dependent relatives but if they die together in a car crash aged 50, they may well still have youngish children, or even possibly dependent parents of a less affluent generation, left behind. In these circumstances IHT at present levels often means selling the family home, and depleted capital left to help the extended family/guardians etc to bring up, educate, etc., the orphans. It also means that whilst there is no IHT if the comfortably off grandparents pay for the grandchildren's school fees when they are, say, 55 to 65, if they should die at 55 and instead leave a trust for the fees to be paid after their death, there is. Why should families be penalised, and the State's coffers benefit, if parents/ grandparents happen to die young?

All of this means that the 37% of households (probably affecting a higher proportion of the population than that, as couples are more likely to live in the larger properties) whose estates are vulnerable to this tax if they die is the real proportion of people who have an interest in seeing the teeth of IHT drawn. Unlike the beneficiaries of the 6% of recent estates who, from a self-interested point of view, may no longer care as their inheritance was too early to be affected by these proposals for the future.

So, a proposal which reduces the potential cost of death for probably 40% of the population actually directly affects more voters than, say, increasing child benefit or spending more on schools (however much they may approve of these much more expensive latter priorities as general principles).

[Londoner]

HF - if Labour steals this IHT policy then the net result is that we will have greatly benefited many fellow citizens without even having to win an election. And Brown will have been demonstrated to be even more shameless than people thought. Sounds like win/win to me.

[Paul]

Of course the increase in the threshold should be welcomed but for the us to form the next government a number of seats have to be retaken in the North. I fear that this policy announcement will do very little to the average working family outside of the areas we already hold seats. Unfortunately I am in America and so have only been picking snippets up, but it is clear how many families this will benefit? Surely a proper income tax would have been better and set the pulses of stay at home tories racing!

[HF]

It looks like Labour have decided not to copy the tax change and instead have Alistair Darling now on tv saying that "Tories cannot fund the tax cut".

Unfortunately the interviewer does not ask Darling why the non dom tax would not pay for it. Why do so many BBC News24 juornos lack any understanding in what they are asked to cover?

We will see what Radio 4 PM does to the Labour response in a few minutes, come on Martha, you heard the bias claims last night!

[Yet Another Anon]

6% of estates are affected by inheritance tax - the wealthiest people in the country. The people who pay the tax are middle aged, usually wealthy, and are paying the tax out of a lump sum they are receiving in addition to their own assets.
The family home should be exempted from IHT as a logical start. If there are to be taxes on Inheritance it would make more sense for them to be on those receiving the Inheritance rather than the Estate - this would be fairer, after all a billionaire under IHT can receive a couple of hundred thousand pounds tax free whereas someone with no money could get less because of a proportion of the Estate going in Tax before they get their cut - an absurd situation.

[Bexie]

Fairly typical of the Brown and Bolshy Coop. I hope we close it as soon as we are in power.

[Traditional Tory]

The family home should be exempted from IHT as a logical start.

Why?

In most cases the family home will be sold and the proceeds distributed. Why should it be treated differently from any other assets passing on death?

[Edison Smith]

I'd vote Tory on these promises

I'm hearing this time and time again since this morning's announcements - and that's in Croydon and the surrounding areas, real Tory v Labour battlegrounds.

Keep 'em coming.

[Cleo]

Isn't the party making the same mistakes it did in 2001 and 2005? People get scared about tax reductions when they fear that the NHS and schools will suffer, even if the sums appeat to add up. I don't believe tax cuts are the salient issue they once were. I would have preferred more green taxes too, offset against income and family taxes and a move to a local income tax.

[Londoner]

UAA at 17:25 says: "The family home should be exempted from IHT as a logical start." NO, this would just stoke up the housing market as oldsters would be under pressure not to trade down their house even when it would be in their own lifetime interest to do so. You could even get people buying more expensive houses when they are getting older to shield more of their estate.

[Michael Davidson]

With regards to tax cuts, I'd rather we cut income tax than inheritance tax. Up here in the North there are very few areas where a person's net wealth is more than £300k. Labour will play this as a tax cut for the richest in society and to an extent they're right. The only people who would approve of inheritance tax cuts are people who would vote for us anyway.

[Terry]

The proposal to raise the extra tax from non-doms is inspired. To very wealthy non-doms 25k is an insignificant sum. Also, many other non-doms especially in the City are tax equalised and, in effect, their companies will pay the 25k. Such is the economic value of these people to their companies, the extra 25k is nugatory and may well be offsettable against tax liabilities in the home country.
At the margin, the tax may slow the growth of non-doms in Britain but Osborne has picked a real winner here. Darling was hopeless and seemed to be picking numbers out of thin air in an attempt to rubbish the idea.

[Deborah]

MikeChristie,
Your arguments are inconsistent.

"A person works hard all their life, scrimps and saves, buys a house etc. etc. all paid for through taxed income. What possible moral justification is there for the taxman to help themself to 40% of it on their death?"

None as far as I am concerned. But you go on to say

"why is it socially acceptable to expect struggling young families to pay for one's healthcare through tax whilst also having to try to make their own way, just to enable one to leave hundreds of thousands of pounds worth of assets to one's family"

You can't have it both ways.

[Deborah]

That's a good strapline -
Lower, simpler and fairer taxes under the Conservatives

[Dominic]

At last some policies that will mean something to a large amount of people most young people will appreciate no Stamp Duty up to £250,000.Putting the threshold up to a million means that the Conservatives have put clear blue water between them and New Labour on IHT.
Another very clever move is putting a figure for non-doms to £25,000 per annum removes all the uncertainty as various groups like Tax Justice Network have been lobbying Labour to remove entirely the tax breaks they get and is similar to a Britain moving to Gibraltar where the yearly figure is £20,000
The promise to remove the failed HIP scheme is another big saving to anybody that moves house
Again all the reds in the bed appearing on this blog seem dislike good policies

[Opinicus]

You see - one decent tax cut and the blogosphere blooms like desert cacti after a dash of rain.

But who created the desert?

[Yet Another Anon]

In most cases the family home will be sold and the proceeds distributed. Why should it be treated differently from any other assets passing on death?
Until IHT was abolished there could be a proviso that tax would apply if the home was sold within a certain length of time.

Don't forget that people could end up being made homeless because of sale of a house to pay for the IHT on it. Even in this country people live somewhere.

[Edison Smith]

Did anyone just seen Emily Maitless v Alan Duncan on Newsnight??!

[Dominic]

At last some policies that will mean something to a large amount of people most young people will appreciate no Stamp Duty up to £250,000.Putting the threshold up to a million means that the Conservatives have put clear blue water between them and New Labour.
Another very clever move is putting a figure for non-doms to £25,000 per annum removes all the uncertainty as various groups like Tax Justice Network have been lobbying Labour to remove entirely the tax breaks they get and is similar to a Britain moving to Gibraltar where the yearly figure is £20,000
The promise to remove the failed HIP scheme is another big saving to anybody that moves house
Again all the reds in the bed dislike good policies

[Mark Fulford]

You've got to take outstanding mortgages, loans, credit card debts etc off that house value.

On the other hand you have to add in life insurance, which is often a requirement of the mortgate lender.

For example, my mortgage has around 20 years to run, but if I die tomorrow it's paid off by insurance. Were my wife to go the same way, our very average estate would be subject to IHT and Gordon Brown would be getting money that should be providing financial security to our very young children.

IHT is not a tax on the rich.

[Nizhinsky]

"Less laws and more of the rule of law" William Hague said at conference.

Surely then, if some people don't pay inheritance tax, no-one should pay inheritance tax. That is the basis of the rule of law isn't it? Equality under the law?

One rule for the majority and another for a minority leads to the slippery road of socialism, and is blatant discrimination of the worst kind.

[west mids realist]

georgie boy how about some real help up north,looking at my local council bump,i find only 124 homes are above the 300,000 threshold never mind the million mark.how about using johnnies money to give us what we really want and that is a real tax cut for the majority of the workers rather than a death tax cut for the moderately well off.

[Chad Noble]

What % of non-doms have no foreign income at all, and are simply normal people from other countries, working, resident and paying their taxes here, but retaining their homeland domicile?

Why should they pay more tax than someone doing the same job? Is Theresa May going to be fighting for equality?

I thought we were seeking to attract not scare off the best talent to the UK.

[Terry]

Chad 6:32
People in the position you outline can just become resident for tax purposes and pay the same tax and you or me. Non-dom status relates to your tax status, not to your nationality.

[Chad Noble]

Hi Terry,

But these people *are* resident for uk tax purposes, hence the full status name "resident non domiciled".

They already pay tax on all UK-earned income, and all income remitted to the UK.

What they are *not* taxed on is income earned and kept offshore.

Residency is a revenue definition, domicile is often defined as the place you call 'home', the place you would like to be buried in etc.

[Terry]

Chad, I interpreted Osborne as meaning that those with the status 'resident but non-domiciled' could either:

1. Stay as 'resident but non-domiciled', pay the 25k levy but not be taxed on overseas income and gains.

or

2. Become ordinarily resident and pay tax on all their eanings and gains like most tax-payers

Those in the circumstances you outlined would presumably be better off taking the second option.

[James Maskell]

So this is the big policy proposal that will sum up the Conference. Itll have to since Browns grabbed the headlines by visiting Iraq today...

Inheritance Tax is something that is not high on my agenda at all. I feel Council Tax and Income Tax are more important taxes to tackle. This policy will sound like we are giving rich people tax breaks...

I was praying for some great policies to back. Weve had some, but Im still feeling very let down.

[Chad Noble]

I hope so Terry, that would make sense but we need to know how many res non-doms actually fall into this option 1.

It currenty looks like the Tory projections are £25k x the current projected *total* number of res non doms for 2008.

I wonder if it is that key difference that has led Labour to claim only 10% of the total non doms fall into option 1 which if true would create a massive funding black hole for Osborne.

[Ken Stevens]

Nizhinsky | October 02, 00:09
"..if some people don't pay inheritance tax, no-one should pay inheritance tax..."

Do you therefore disapprove of all thresholds? e.g. income tax personal allowance, exemption from stamp duty below a specified house price level, CGT allowances, etc, etc?

What is wrong with inheritance tax is that the State just looks at a wodge of money and says "Oooh, I'll have lots of that!" above an arbitrarily set level. It hits those who would not otherwise be described as rich (the latter being able to afford lawyers to devise all sorts of arrangements to avoid liability arising).

[Terry]

Chad, Osborne has assumed 150,000 tax-payers would pay the levy, which does not seem unrealistic to me. Multinational companies move employees around and this area of expatriate tax has become a growth area for accountants. I don't know where Labour came up with their figure of 15,000. I suspect that they have just included the super-rich - the legendary Russian billionaires and their ilk. That will vastly understate the true figure.

[William Norton]

This is one of those wonderful historical anomalies. The reason domicile is in the tax system is because during the 19th Century the courts cut back the application of UK taxation - you might remember we had a spot of bother in the late 18th Century over whether UK taxes applied to America.

The current system is a compromise between practical collection and legal jurisdiction arrived at in 1914: we'll tax the earnings and assets of UK residents; the non-UK earnings and assets of UK domiciles; but the non-UK earnings and assets of non-UK domiciles only if they are remitted here.

[passing leftie]

For example, my mortgage has around 20 years to run, but if I die tomorrow it's paid off by insurance. Were my wife to go the same way, our very average estate would be subject to IHT and Gordon Brown would be getting money that should be providing financial security to our very young children.

IHT is not a tax on the rich.

No it wouldn't. If you have a proper will, you would pay no tax at all. Property transfer between husband and wife is free of tax. See a solicitor. I think there is at least one well informed one on this thread!

[Chad Noble]

Hi Terry,

I don't want to ignore the very good news of the IHT cut (well done that man), but by linking it directly, penny-for-penny to the projected revenue gain from the non-doms levy as Gids has, I think he has created a rod to beat him with.

I'm sure that in the coming days, even non-partisan experts will easily pull apart this,imho, flaky £3.5bn income projection.

[William Norton]

Passing leftie: I think you've missed Mark Fulford's point, that Mrs F would inherit from him free of IHT but then when she died the little Fulfords would be clobbered for IHT on the combined estate. There might be quick succession relief available depending on the time interval but I think Mark has captured the basic problem with inheritance tax: it, er, taxes inheritances (among other things).

You are broadly correct that it is possible to plan in advance to, ahem, mitigate your exposure to IHT - it has been described as a tax on people who dislike their families even more than they dislike the Inland Revenue - but that's Mark point in a nutshell: IHT clobbers the people at the bottom end of the scale who fall into the net via fiscal drag and don't know they're supposed to be planning 7 yrs ahead.

[Terry]

Chad, I agree that no tax projection is certain. However, I don't think this one is more 'flaky' than any other. Depending on how it is structured, and presumably we'll only know this when it it enacted, it could encompass more people than Osborne assumes. For instance, if non-working spouses or other family members want to protect any overseas income, they will also need to pay the non-dom levy. At the moment, they probably don't figure in the tax statistics.
The Labour rebuttal machine will have difficulties because the more light that is shed on this issue the more will be the questions about why they have never done anything similar. After all, even if one accepted their much lower assumptions, the additional tax is still considerable and the cost of collection is small.

[Mike Christie]

Deborah, my arguments are only inconsistent if you apply the warped logic of a socialist that the state must provide such basic services as healthcare.

It is immoral for the state to grab 40% of whatever we have left when we die, just as it is immoral to expect the state to pay for your healthcare when you have hundreds of thousands of pounds worth of assets.

Dependency on the state becomes self-fulfilling, people pay the higher taxes and feel they have a right to claim whatever is on offer when they could provide for themselves instead.

If a person has a house worth £500,000 and towards the end of their life needs some specialised care, surely it is reasonable for them to be expected to sell that house to fund their stay in a nursing home, or maybe downsize to fund care at home.

However, it should then also be entirely reasonable to expect that any funds left at the end of their life are passed to their heirs intact without the taxman helping himself.

The two are linked in a pact between taxpayers and government. I always believed that the basic rule of thumb was that Socialists thought that the pact was that Government taxed you as much as they could get away with and attempted to provide for your every need, where as Conservatives believed that you should provide for yourself as much as possible in return for a lower tax bill and the freedom to live your life like a grown-up making decisions for yourself.

[David Lindsay]

As part of a wholesale shake-up of the taxation system, I'd happily see both inheritance tax (as well as capital gains tax) and non-domicile status abolished. If George Osborne had announced that, then, a lot of other things being equal, I might have been more impressed. Which is to say, even vaguely impressed. But he didn't, so I'm not.

Academic though the matter is, has David Cameron considered appointing a Shadow Chancellor who can add up? Both on IHT and on non-doms, it is perfectly clear that Osborne cannot. Meanwhile, I propose a new brand of high class biscuit, Cameron & Osborne's: "smooth on the outside, thick and crumbly on the inside".

Indeed, we should take to referring to the Bullingdon Boys as "Thick & Crumbly". But which is which, and why?

[Patriot]

Mike Christie, 12:47

Mike, my challenge with your reasoning is that it can be seen as an incentive to neither work nor save.

If I sit in front of the television and live off benefits for my entire life I am, in theory, guaranteed that my needs will be paid for in my senior years. If I work my fingers to the bone scrimping and saving to put a bit by, pay my mortgage and put food on the table, and go without holidays and luxuries to do it, you are telling me that everything I have saved should be taken away from me when I need healthcare.

Don't misunderstand me, I am not arguing against a compassionate, caring and supportive society which maintains a safety net for its needy, but I do question a position which seems to penalise the hardworking and thrifty.

Doesn't seem right somehow.....

[Mike Christie]

Patriot, the safety net should be exactly that, something to catch you in an emergency. It shouldn't be so comfortable that you'd choose to lie on it all your life. The problem with our current system is that the benefits are generous enough to make sitting at home watching Tricia and scratching one's posterior a lifestyle choice.

I was talking about selling the house to pay for care to make my point. In reality most people would take out insurance/investment plans designed to cater for the cost of later-life care. Lower taxation from the state being expected to do so much less (not provide healthcare for the nation) and doing other things much more efficiently (paying other entities to provide what services are still state funded) would offset what people did pay for health insurance.

[Patriot]

Mike @ 14:42

""In reality most people would take out insurance/investment plans designed to cater for the cost of later-life care.""

Most people? Most people where Mike?

There are 60 million people in this country. How many of them do you think can afford what you have just suggested? Do you seriously propose that tax be reduced so much that they could then pay enough into the fund you are describing?

And if you are saying that any reduction in tax should then effectively be paid out again to compensate for the service which is being withdrawn to fund the tax cut, why bother to cut the tax in the first place?

Comprehensive Medical insurance for a couple age over 65 is going to cost them a small fortune at a time when incomes for all but a privileged few are dramatically reduced.

Pre-retirement many if not most people in this country are pushed to pay their bills, put food on their table and find their mortgage or rent; finding extra for a pension is nice to have and many do their best to put some aside if they can, but for most to find yet more money to meet the additional cost of paying into yet another fund for medical care when they retire is a distant dream.

So I return to my original post - to then
say to people that having scrimped and saved to put a roof over their heads that same roof should be taken away from them to pay for health care when they retire is, imho, a smidge insensitive at best.

What I think you're describing is the American health care system. The reality of what the USA has seems to come down to "those who have money or job related medical insurance get health care, those who don't, don't."

I'm not sure I would view that as an improvement on our present system, flawed though it undoubtedly is.

[William Norton]

My only comment on the numbers side:

If HM Revenue & Customs really did have a good grasp of how many non-doms would be genuinely willing to pay £25,000 to make them go away then

(a) there's been a serious foul-up by an awful lot of accountants;

(b) HMRC would be assessing more non-doms for £30,000 in back taxes.

Moral: ignore Darling's figures.

[Steve]

Does anyone know if there has been any definitive comment that the IHT proposals will not be accompanied by the abolition of inter-spouse transfers etc? ie Under these proposals, couples with £2m of assets are effectively exempt from IHT on death - unless the ability to transfer between them is restricted or abolished.

There's a lot of reference to 'households' and 'household wealth' that's all.

I'm sure such a below the belt change wouldn't occur but can anyone confirm??