Inheritance tax should be scrapped and replaced by a system that is fairer and harder to avoid, an economic think tank has said.
Death duty is a “failed” and “unfixable” tax which does not keep up with modern society, according to the Resolution Foundation.
Adam Corlett, Senior Economic Analyst at the think tank, said inheritance tax “manages the uniquely bad twin feat of being both wildly unpopular and raising very little revenue.”
The taxman collected £5.2m from inheritance tax in 2017-2018, a 53% rise in four years, figures from HM Revenue & Customs show
m is just so close to b on the keyboard, isn’t it?
Hard to fathom how a tax can ‘fail.’ If it raised any revenue for the state, it succeeded.
Did it fail in not keeping people from dying?
“If you want less of an activity, tax it.”
” Inheritance tax should be scrapped and replaced by a system that is fairer and harder to avoid ” !!!
Think tank ? Zombie tank more like .
We plebs need to keep a lot more of our own money NOT the same rip off tax by another name .
MARK TWAIN . ” no mans life , liberty or property is safe while the legislature is in session in Congress .”
Here in Canada we have something called a “deemed disposition”. On death, you are deemed to have sold all your assets at the FMV on the date of death, and your estate pays the capital gains taxes. The beneficiaries inherit those assets at a cost of the death-date FMV.
I suppose just jacking it in, with all its distortions and avoidance mechanisms, is out of the question?
£5.2m? M is close to B on the key board, but the reporter might also have been confused by all the zeros in the original report.
“your estate pays the capital gains taxes”: that would suit many people here very well because your Principal Private Residence is free of Capital Gains Tax. (A law instituted by a Labour government, would you believe?)
“Death duty is a “failed” and “unfixable” tax”
Serious question; is there any theory or principle behind inheritance tax at all?
Principle behind inheritance tax: envy, hate, spite, punishment
Same principle applies to many taxes.
It’s so much more fun to use taxation to manipulate people than to just raise money.
“Did it fail in not keeping people from dying?”
That happened in one country (Australia, I think). A reduction in inheritance tax was announced, but not to take place for a few months. In the intervening time, the death rate dropped noticeably.
I wonder which tax is worst – CGT or IHT. If you believe the papers on optimum tax theory CGT is far far worse, and the calculation of what is due doesn’t even allow for inflation. The Resolution Foundation didn’t do much reading before wading in with their opinion.
Apart from that, PCar.
“the calculation of what is due doesn’t even allow for inflation”: there was a spell when it did, so it presumably would be easy enough to bring that back.
The problem was that old approach of “indexation” (from 1982 – 1998) and then “taper relief” (1998 – 2008) was that it encouraged people to hold on to assets for longer, thus depriving the government of tax due on sale.
I wonder which tax is worst – CGT or IHT
Neither, it’s income tax. I pay lots of income tax, zero CGT or IHT.
Speaking as someone who deals with CGT all the time, the way I see it is that income tax deals with value you get from short-term transactions and CGT deals with value accruing over the long term.
I can’t see any particular reason to tax them differently (but I’m not an economist). In terms of keeping a simple and fair tax system, I would say that capital gains should be taxed at the same rates as income (so there’s no incentive to try to recategorise one as the other) but with indexation allowance so you don’t get taxed on inflation. That would make life an awful lot simpler.
I’d also like CGT on death rather than IHT. IHT on lifetime transactions does nothing but make people jump through hoops to avoid it. It changes the base a bit, as you’d not tax cash but you would tax somethings that are currently exempt; but I don’t see why taxed cash should be taxed again, and deferral reliefs can be added where necessary.
@ Pcar and Ducky
The purpose of IHT is to raise moneyfor the Exchequer. It got misused by Attlee to destroy the landed gentry who were faced with bills on the “value” of unsaleable stately homes and mansions that they could only pay by selling off the farmland whose rents were needed to pay for the upkeep of the mansion.
If levied at a modest rate, say 10%, it would be no more evil than most other forms of taxation; at 40% it breaks with the “ability to pay” clause in the Noddy guide to taxation.
Brown abolished indexation relief as a stealth tax to steal money from savers by taxing them on unreal gains.