Inheritance tax is paid if a person’s estate is worth more than £325,000 when they die and if they have a family home gradually further relief will be granted that could take the tax free allowance to £500,000 per person at tax year 2020/21. So a couple by then could have a total allowance of £1m.
It does appear this tax is one of the most hated by some people. They feel that, after being taxed all their lives, they resent having a tax levied on them or more accurately their beneficiaries. It could be argued too much attention is paid to this tax as it is affecting less and less people, with the people who are affected shouting very loud indeed making it a hot topic.
From the evidence available this would appear to be true with 30% of people in year 1938/39 paying estate duty and just three per cent paying it today. It is possible the figure today is low because the rich use the tax system to avoid paying this tax, but equally it could be said the significant increases that the government have granted will take even more people out of inheritance tax.
Some would argue that, perhaps, the current arrangements are too generous with very few people paying this tax leaving less money to be spent on essential services. They believe that easy access to unearned wealth destroys the incentive to work. This idea is best summed up by the Scottish philanthropist Andrew Carnegie who said, “The parent who leaves his son enormous wealth generally deadens the talents and energies of the son, and tempts him to lead a less useful and less worthy life than he otherwise would.”
In the USA this idea has taken root with the prosperous ensuring their children have the necessary tools such as education to make their own way in the world, but perhaps less inheritance than they would have received in the past, with the wealthy actually campaigning against the elimination of inheritance tax. This movement to continue this tax includes 120 billionaires.
But whatever happens in the USA I predict this tax will continue to be a political hot potato in the UK for many years to come.