The papers seem to have been going on about IHT for the last couple of weeks. They were saying it was unfair, punishing prudent saving and good investment, hitting people when they’re down (literally), how it’s a recent tax, etc. etc..
I also listen to podcasts like MoneyBox and FT Money. I recall a mention or two there (on FT Money at least).
I think HMRC were seeking opinions.
After I created some typical IHT models I realised how rich you have to be for IHT to really make much difference. I don’t think I’ll be paying much attention to it. But if I do get phenomenal asset growth and IHT becomes a factor, there will easily be enough money to pay for a trust to be set up and thereby dodge the tax (as far as I understand trusts – something to look at if it gets relevant).
The people who stand to benefit from abolishing IHT are the children and grand-children of the very rich. Already they’ll have inherited-pensions to live off, and people are campaigning for them to get houses and savings tax free. Worst of all it will keep house prices inflated.
IHT is unpopular because it’s an unknown. Once people understand, the vast majority will realise that it won’t affect them, and that it’s more like a high-wealth tax. Maybe the thresholds and percentages could be adjusted or tapered, but it doesn’t seem terrible now, certainly not for a married couple.
I saw one blogger saying that IHT was bad because it would drive them to spend money on their kids when the kids are younger, on activities etc. – doesn’t sound a bad thing.
A friend of mine said, “If they’re going to tax me, I’d prefer them to tax me when I’m dead.” Fair enough.
The only things that make me think twice are:
- That people use trusts to dodge it. I do think that trusts are far too good at avoiding tax. They’re fine for making sure things are controlled after your death, but they seem far too useful for the very rich to avoid tax.
- That pensions cascading wealth down the generations seems socially wrong, and some form of IHT on pensions seems fairer.
There are problems with HMRC wanting the tax faster than the executors can liquidate assets. That needs looking at. But it’s no excuse to abolish a tax that is socially a good thing.