The first of these claims will be that everything subject to inheritance tax has already been taxed once already.
That is total nonsense. Inheritance tax is, in part, a tax charge on untaxed capital gains, which are cancelled on death. These gains have not, by definition, been taxed in any other way already.
And nor is the value of most estates made up of previously taxed savings. Most are made up of the value of homes – and these are never otherwise taxed at all.
We do not tax gains in principal residences in this country. OK, fair enough, we don’t.
So why should we at death?
For example, the basic personal allowance is frozen this year. It should have gone up by about 10% because of inflation. That increase should have been about £1,250, which would have given a £250 tax cut to most taxpayers in the UK. All 33 million of them.
The cost of that would have been a bit above £8 billion – near enough the same as the cost of abolishing inheritance tax. But the vast majority of those getting that £250 would have spent it straight away, unlike the person getting the gain from inheritance tax, who would have saved it.
D’ye recall when Spud was so against raising the personal allowance? I do – he spent a decade shrieking that most of the benefit went to higher earners.
And then this is just gorgeous:
The difference is really important. Spending the money keeps it in the economy. Each person’s spending is another person’s income. It is as simple as that when we think about the economy as a whole.
What that means is that the person getting a £250 income tax cut uses it to boost other people’s income – meaning that the recipient of their spending also pays tax on it, as does the next person who gets it, and so on, giving a real boost to us all – and the Exchequer.
If you told Spud that he’s supporting the Laffer Curve he would deny it, absolutely. And if you told spud that he’s supporting dynamic scoring of tax changes he’d deny it, absolutely. And yet that’s exactly what he is doing there. Sure, of course tax changes (up or down) have dynamic effects. And we must account for them on revenue collected. Certain tax cuts will ripply through the economy and the final tac revenue loss will be less than the headline and first order one. Sometimes that effect will be so large that final tax collection will be higher than the oroiginal before the tax cut – the Laffer Curve taxes paying for themselves.
But if you said to Spud – Laffer Curve, tax cuts, higher revenue – he’s say no. Because, umm, well why?
Its like Bastiat never existed
So we can conclude he’s not going to inherit anything then.
I don’t think they’ll abolish IHT anyway. It might be popular and they’ve got an election to lose.
“ So we can conclude he’s not going to inherit anything then.”
Or anything to leave to his sons.
“That is total nonsense. Inheritance tax is, in part, a tax charge on untaxed capital gains, which are cancelled on death. These gains have not, by definition, been taxed in any other way already.”
And, when passed on to the inheritor, still aren’t capital gains.
They become capital gains when cashed out. *That* is the point you have to answer to the taxman. Until then the *actual* value of the capital is still speculative.
Don’t you have a housing shortage in the UK? So I’d argue that taxing people out of the family home is not going to solve it.
Of course the real solution is to send all the illegals to Rwanda. Though, thinking of the good old days, perhaps you could sell them as slaves to the Saudis.
What he fails to consider is the effect this will have on all those who currently legally avoid inheritance tax by buying up agricultural land, using various trusts or some other legal means.
Maybe if the landed gentry were not discentivised to sell their land then the actual farmers may be able to buy it ( or we could build on it).
It might create a roaring trade for UK care-homes for foreign billionaires who are looking to relocate towards the end of their lives.
Big election today in Argentina
Sergio Massa is underdog in the betting at 43% probably to win on Betfair
Favourite is Javier Milei.
Obvs rooting for Milei to triumph partly for the fun of seeing Ritchie become an expert within a week on countries that Dollarise or Euro-ise and arriving at the wrong conclusion.
If you can comment on his site, get in early and suggest that dollarising enables fascism, authoritarianism, climate breakdown, selfishness and the holocaust.
“We do not tax gains in principal residences in this country. OK, fair enough, we don’t.
So why should we at death?”
Because, by definition, it is not the principal residence of the person inheriting it.
Betsy
The person inheriting it does so at the value at death. It either becomes their PPR at that point/value or they pay CGT from that point/value if it’s not then their PPR.
Use an example. House bought for £0, value £1m on death. No CGT. Hence, £1m is in the estate for Inheritance Tax. Example 2, it’s sold for £1m 1 day before death, for cash. No CGT (because PRR) and again £1m in the estate for IT purposes at death. It would be a bit spaz/socialist to charge CGT and IT – just because the old girl didn’t sell it (and then re-buy it, to crystallise the PRR exemption) shortly before popping her clogs?
PF
That is answering a different question. My point is that the asset being taxed is not the PPR of the person being taxed. Yes, I know that technically IHT is a charge in the estate.. but well a know the incidence is on the inheritor(s).
I get that IHT doesn’t work very well or raise very much and objections to it on those grounds make sense to me. What I don’t get is people who think someone who goes to work for 20 years to earns a million quid should, in principle, pay infinitely more tax than someone who gets given a house,
The PPR tax exemption makes sense because of the way the housing market works, and because I think we have a general societal interest in not throwing a capital gains spanner into people’s decisions about where to live. But I’m fucked if I can see the problem with tax when it’s passed off to a lucky sperm. That said, I don’t hide that I’m not someone who expects to inherit much myself.. indeed, nothing will make me happier than if my old ma’s last cheque bounces. I don’t have kids and don’t give a toss that the taxman will take a chunk out of my estate before my siblings offspring get hold of it. I don’t have any skin in this game.
Betsy
I’m not sure you’ve understood my point (or perhaps you have and I’m missing yours, apologies, mine was slightly précised and might have been confusing). I was trying to reply to your comment about CGT, not the question on comparison with people who have worked.
You say: “someone who gets given a house” but that amount is only given to the inheritor after IHT has been paid on it, same as if it was cash being held in the estate (in lieu of the property) and then given to someone (ignoring the additional £175K housing exemption, I grant). The inheritor does suffer the effect of IHT on the estate that includes that house at full current value on death, not the original cost of the house.
If the PRR exemption makes sense (as you suggest), then why should Granny not benefit from that as she pops her clogs, or does she have to anticipate her death and arrange a legal transfer say 5 minutes beforehand, which would then (quite properly) remove any CGT question at the point her heart did in fact stop.
There might be a better CGT argument in this context to be made on investments or other assets held at death (rather than a PPR) that Granny wouldn’t be able to liquidate freely (without CGT implications) if given that 5 minute heads up.
If your argument is more about the comparison, then that’s a whole different issue.