Will the property you leave behind be taxed at 40%?
Arguably, one of the most hated taxes in Britain is inheritance tax, but the left-leaning think-tank, the Fabian Society, says the principle of taxing wealth "must be defended" to create a "fairer society".
Its recent report states that the government needs to reform IHT in order to defend it, suggesting that a "lifetime quota" of tax-free gifts should be introduced, with anything exceeding that being given different tax bandings.
Tell us your views on inheritance tax.
Do you think it is the fairest way to tax wealth and promote a fairer society?
Would you prefer the introduction of a "lifetime quota" of tax-free gifts?
Or perhaps you think the tax should be abolished.
We asked for your comments, a selection of which are below. The debate is now closed.
Earned money should be taxed at a lower rate and/or with a higher tax-free threshold than windfall money from any source.
Nick Sharp-Rees, Maidenhead
The high cost of inheritance tax has been mostly caused by obscenely high house prices, the main effect of which is to cause a large chunk of the value to be paid to the Treasury every time a house changes hands. The solution is to force house prices substantially lower. Thankfully this is already starting to happen, although it will take more than the current 10-15% falls to have any significant effect.
Why is it fair that we should pay tax at least once, and still be taxed on our estate? It is grossly unfair that people that save the most, and plan for future generations get penalised. It is a small concession that we have the nil-rate band, however, this has not risen in line with many people's biggest assets: their homes.
Nathan Clamp, Leeds
I find it strange that so many of the comments on this topic are so hostile to the levying of taxation by governments. Taxation pays for all of our shared public services, without which our lives would be impoverished. Taxation has to be raised from one source or another, so it is a question of how best this can be done equitably. I think it would be better and fairer to raise more, rather than less, through inheritance tax. This would enable taxes to be lower on the young, low-paid, and families, and would, I believe, provide a greater incentive for hard work, and a higher income for people when they need it most. It seems to me that most people who inherit money do so when they need it least, in their later adult lives, by which time they are often reasonably well financially-established.
Sue Smith, Southampton
IHT should be abolished. Most wealth has normally been accrued through prudence and sacrifice. The government should direct their efforts to recovering wealth accrued through illegal activities not law abiding cautious lifestyles. Where would we be with this credit crisis if there were no private deposits and everyone was in debt? The cautious, prudent savers are keeping society afloat at present. IHT leads individuals to spend rather than save and to borrow rather than develop. IHT removes incentive to accrue wealth and all countries require a bedrock of wealth in order to develop and this wealth must not be redistributed by governments with wasteful and ill considered ideas.
How many bites at the cherry does the state want? It taxes us at up to 51% when we earn it, at 17.5% when we spend it and still feels the need to tax us again when we finally want to leave it to our family. IHT (like stamp duty) is completely immoral and should be scrapped immediately.
Keith Barber, Brentwood
I am unclear how the imposition of IHT improves social mobility. All IHT does is to funnel money from private to public consumption - where the impact on "social mobility" is to say the least, somewhat limited. The high cost of property - and the difficulty in young families in starting up on the property ladder will not be improved by an IHT levy. What will make it easier is a loosening of planning restrictions, curbs on immigration and building more low costs housing - not by taxing the middle class. An earlier comment talked by a "meritocratic" society - well how do you measure "merit" and reward those who are deemed to have merit? If a "well-to-do" family have children who are not bright - surely it is right for them to make some financial provision?
R Barrey, Barnet , London
Inheritance tax should be abolished as it generates only 1% of public expenditure. I'm sure most people won't notice if the government did 1% less. All the other views about double taxation and "grave robbing" I wholly agree with. But no. It is the manner in which the tax is applied that I most take exception with. An executor of someone's will must provide a valuation of the deceased's estate and pay the tax due within 6 months of the date of death (or incur additional interest charges). All very easy if the deceased had the foresight to realise all assets prior to departing this world and leave a pile of cash at the side of the death bed. But what if there is property, possibly overseas with all the additional requirements to manage these through foreign legal systems, other overseas assets, antiques or any other non cash assets? There is no provision to extend the 6 month time limit. How many people realistically would expect to be able to realise a house in the UK, at the moment, within a 6 month window. This is what causes most distress to people (quite apart from the loss of a relative).
Maurice Gowen, Henley-in-Arden
Full marks to Rachel Garver. Inheritance tax is a complete misnomer, it being really estate duty or death tax, and what is urgently required is to replace it with a proper inheritance tax paid according to how much recipients receive. Then, if you don't want your beneficiaries to pay it, spread your money around a bit more.
A year ago I was looking to buy my first house and was struggling to find anything that I could afford. Fortunately my parents were able to step in with a gift that I could use as a deposit to buy a house. I don't see that my "social mobility" would have been improved by taxing that gift.
There is very little that is ethical about inheritance tax. There is an element of jealousy about those who favour it. It assumes that the State has ultimate ownership of all personal property and that the State knows better than individuals how their wealth should be distributed after their death. Personal property is one of the pillars upon which our democratic freedoms depend.
Sunder Katwala's proposal is even worse than the current inheritance tax as it introduces a highly bureaucratic administrative procedure to monitor and control what we do with our wealth while we are alive. The Irish may have introduced a gift tax but how rigorously is it enforced? My suspicion is that a fairly lax attitude is taken to avoid raising opposition to the tax, with considerable latitude allowed for tax evasion for those so inclined. I would propose an alternative ethical standard for taxation, that we should retain at least 60% of any earnings or gains after deduction of tax, reduction of tax credits or reduction of benefits arising from those earnings or gains. It seems only fair to me that those who work hard and take risks should benefit most from their efforts.
Why is it always assumed that the government has to maintain its income/spending levels, rather than work on becoming efficient, saving money and allowing people to benefit from their hard work? Can no one see the obvious correlation between the attacks on hard-working, socially aspiring, prudent people and the concessions to feckless, hand-out grabbing meat-heads and all the problems of worklessness and lack of social mobility? Soon we the hard-working will just stop trying and go on an easy life on benefits. Reward those who work; reward those who abide by the law. Punish those who don't do either. It's simple.
Inheritance tax is an evil tax. I am fed up with left wing think tanks coming up with proposals on how they intend to steal more money from people who have worked hard and already paid a fistful of tax. What is the point in working hard and trying to stand on your own two feet if the government continue to steal as much as they can from you? I am sure most people would rather their hard-earned money went to their loved ones rather than be thieved at the graveside by a spendthrift government. I think the tax should be scrapped or only levied on the genuinely rich - not the hard working middle classes who have been the main losers from this wretched government.
Inheritance tax is both stupid and wrong. It is stupid because it ignores human nature: people do not wish to work hard and save money in order that the results of so doing will benefit complete strangers who do not work and save money. People who wish to give money for the well being of strangers do so by giving to charity. The more the state takes, the less the possibility for altruistic giving. It is wrong because it discourages saving and being careful with money and encourages people to spend/waste their money rather than have it taken by the state. So inheritance tax encourages selfishness and profligacy - not very moral.
"Inheritance tax" as it currently exists should actually be called "estate duty" and, as a property tax, may be described as double taxation. A gift tax levied on the recipient would not be open to the same charge: gifts above a modest threshold would simply be added to income and taxed like any other income, and I have long held this to be a much more sensible system, although I personally would probably be worse off as a result. I had not considered a life-time tax allowance in addition to an annual one, but it seems a good idea. To protest about the difficulty of keeping track of gifts received over a lifetime is disingenuous: it is no harder than keeping track of National Insurance or private pension contributions. My main reservation is that some people are very good at under-reporting their income. Avoidance schemes would become largely irrelevant, but there could be widespread evasion. Well done to the Fabian Society for raising his issue.
Inheritance tax is not only unfair but totally immoral and indefensible. Any tax that either puts people in a position where they cannot pay, or forces them to seriously change their life to pay, cannot be right. Such a tax is never going to make the poor rich, or even help them. The very rich can largely avoid it anyway. My mother-in-law lives in a granny annex attached to our house. If something was to happen to my wife and I, neither of my children could pay the IHT resulting from the value of my home. It would have to be sold, effectively making my mum-in-law homeless. That and similar situations created by this tax cannot possibly be moral or right. Politicians are encouraging us to be more family orientated. IHT removes much of the motivation and incentive to work hard for your family. Most of those involved with this tax are not super rich and cannot negotiate with the Inland Revenue with paintings, valuables and estates. What is wrong with trying to give your offspring a helping hand?
The logic of the Fabian society's proposal can only mean that no-one should be allowed to earn more than a set amount since clearly 'social mobility' will be stifled by some children having rich parents and others having poor ones. Unfortunately, this takes away any incentive for people to better themselves and the Fabian society's proposal is part of the same rather miserable and envious world view.
I cannot understand why the government is so intent on the redistribution of wealth. From many of the comments I have read it is obvious it is only those that have nothing that support this unfair tax. It is jealously in the worst degree to rob those who have been frugal throughout their life and simple wish to pass it on to whoever they want without paying the heavy penalty of 40% to the government. The Professor was quite right: scrap inheritance tax altogether and pay for it by reducing government expenditure and waste. Getting rid of all the quangos would be a good start.
Abolish IHT entirely because the money being handed down, either in property or cash or whatever, has ALREADY been taxed at source when earned. This is double taxation, it is just a ruse to grab more of the honest shekel of honest working people in a dishonest (yet legal!) way. My same view goes for VAT and all other taxes: i.e. money earned - ergo taxed - is then taxed again, and so on. It is basically immoral. Abolish it now: we need only one tax, income tax - that's it.
If I spend all my money, then the government bends over backwards to give me handouts. If I save it to pass on to my children the government takes 40% of it when I die on top of the 40% it took when I earned it. How fair is that Fabian Society?
"One of the most hated taxes in Britain is inheritance tax." Who says? The Daily Mail? I for one, do not agree. There cannot be anything fairer that a tax levied on wealthy people when they die. Just ask the lower paid whose tax has gone up to pay for the increase in the IHT threshold.
I am fed up of people like the fool from the Fabian Society wanting to create a 'fairer society'; what does that mean? Those who work and struggle then leave their wealth to family or whoever should not have their money 'robbed' by the government on death. We all pay enough tax in our lifetimes! Many countries don't have inheritance tax and neither should we. Any suggestion of lifetime gift taxing is just more stealth taxing to rob those who work (and yes, have a bit of luck from family leaving monies) to give to folk who want it all given to them for nothing. It's about time this tax was consigned to history.
The politics of envy? Nobody has a right to inheritance. Everybody however has a right to dispose of their wealth as they wish. They have earned it, it's their money. There is a unit in society larger than the selfish individual. It is called the family. You have a right to work to improve life for future generations of your family. We don't live in an egalitarian Marxist utopia neither do we wish to. Tax is supposed to stop things so why do tax work so eagerly? And here's a message for the silly Fabians: life's not fair, get over it!
It is obscene that person A can inherit £2,000 or even £100 when next door, person B inherits nothing! Inherited wealth should be put back into the economy to help 'unfortunate' people and causes. Those who inherit a lot of money or, those who 'plan' to inherit are much less likely to work hard or to save.
The Fabian Society professor who argued for IHT as a tax on windfalls, aimed at assisting social mobility, showed the hypocrisy of the Labour position on these matters. A windfall gain is by definition unexpected, indeed 'unexpectable'. This is not true of inheritance gains - save in a tiny minority of cases, these gains result from deliberate planning within a family and can be to some degree anticipated by the recipient. The only true windfall gain possible in our society is a gambling win, and this includes absurdly massive lottery wins running into many millions of pounds. Because of the very high odds against winning, there is no way in which such gains can be planned for or anticipated, so that a tax on such gains would be not only fair but painless, as the person cannot miss what s/he never had or could have expected to have. A government which argues for taxation of windfall gains on the grounds of social redistribution, but which zero-rates massive capital windfalls in the form of gambling and lottery wins, adds hypocrisy to cowardice.
The people who oppose IHT are those people who know they will never have anything to hand to their children because they are lazy, stupid or both. Incapable of ever amassing wealth of their own they also want to deny it to all others. What a sad bunch.
I am against the cumbersome bureaucracy of lifetime gifts and inheritance taxes as envy taxes. However, the very old need expensive care and as a generation could afford to pay for it out of their wealth by way of a lower rate of inheritance tax applied to a relatively low threshold. That could also enable the present means tested systems which are unfair and complex to be abolished.
The decision to increase the IHT threshold was another blow against a progressive tax system. The moral case for IHT, CGT, higher rate IT, tougher anti-avoidance measures need to be made at every opportunity as the route to a fairer and more decent society. Correspondingly, dire warnings about the disincentives of a high tax/high welfare society need to be challenged head on.
Dick, Rye, East Sussex
It is not morality that should be emphasised so much as merit. Inheritance is the motor of the class system (the anti-meritocratic system). Rich parents (who may or may not have worked hard to obtain their wealth) pass on an overwhelming advantage to their offspring when inheritance kicks in (and indeed before that point). The offspring may be utterly lacking in merit, but inheritance makes it probable that they will have much more successful lives than meritorious individuals from poor backgrounds. If you believe in merit, equal opportunity and a classless society you would support 100% inheritance tax - i.e. no parents should in any way be allowed to rig the system in favour of their offspring by supplying them with massive resources denied to others. Anyone who dies wealthy enough to pass on an unfair advantage to his nearest and dearest is a disgrace to a meritocratic society. If you earn it, spend it... but not on securing anti-meritocratic advantages for your relatives and friends.
Mark Hendry, Newcastle
I agree with the professor on your programme - that we need to encourage people to earn more. Surely the best way to do that is to raise the income tax threshold to say £100k or £200k? Inheritance tax should be tightened up: what have some children done to deserve all that wealth? They pay tax on income but why should they get a huge mass of UK capital with no-one benefiting from it even in part? To scrap this tax is embracing once again an age of the lazy silver spoon.
Andrew Sykes, Woking
I find the view that many young people will never be able to get on the property ladder if we do not keep inheritance tax as it is quite ridiculous. My first mortgage over 30 years ago could only be achieved with at least a 10+% deposit and mortgage interest payments well in double figures. I had no parental support financially but was still able to "get on the ladder" by saving for several years and then budgeting quite frugally to manage the mortgage. Last year, my Father died and inheritance tax was paid on his estate - relatively a whopping percentage. My Father's view was one's savings are funds first taxed at the point of earning, then taxed again should interest be achieved and then finally taxed yet again through inheritance tax. Perhaps we should be thinking about changing the threshold or reducing the percentage to make the system fairer all round.
Vivien Finch, Leigh on Sea, Essex
I believe it iniquitous to tax people who have been careful with their finances throughout their lives and already paid tax on their income. Spend beyond your income and the state steps in and picks up the pieces - paid for by those of us who have been responsible. If we have to have inheritance tax, then the threshold should be at least £1M.
Graham Richards, Churston Ferrers, Devon
I am a student aged 20, and I stand to inherit from my parents at some stage in the future. I feel it is extremely unfair that my parents should pay tax on their earnings, tax on their savings and interest, and then that the money they have saved to benefit me or my children should be taxed again upon their death.
I am sick to death of organisations like the Fabian Society spouting about what we should do with our own money. We keep the third world and the feckless throughout our tax-paying lives. There's no way we'd want to deprive our family of any little amount of money we've worked bloody hard to earn. Do-gooders want to put their own money where their mouths are. Leave the rest of us to do what we want with our own money.
Mrs D Davey, Essex
To increase mobility using inheritance manipulation must be progressive and steady. The French enforced splitting of wealth at death to spouse and all children has achieved this much more than our system. To give specific portions of inheritance regardless of where it is or how it is held has been effective. The point has been reached where the French may move toward more protection of the spouse.
Fred Barrett, Swanwick, Derbyshire
Inheritance tax is entirely moral. Wealth is already much easier to acquire by those who already have it; a clear and strong inheritance tax for the rich is both fair and moral in the prevention of the growth of hyper-dynasties of wealthy families.
Jez Kemp, Chelmsford
Am I missing something? Surely the income was taxed the first time round when it was earned. It will be taxed again when spent by the inheritor, what justification is there for an added cut. Another thing which irritates me intensely is that the tax is abolished between married couples. People who strongly disagree with the principle of marriage find themselves forced into matrimony because of this unfair disparity.
I am taking it as read that some form of inheritance tax will remain in place, and I have a vested interest in that, as I will be liable for it. My subjective view is that I strongly resent the idea of double taxation of already tax-paid assets; however, to remain consistent I do believe that taxing previously untaxed "windfall gains" is fair game. So I wouldn't object to the gain in value of my house being taxed after death, but I would object to its whole value being taxed (not that I'll be there to object!)
The Fabian Society ignores the fact that in most cases the wealth that has been accumulated has already been heavily taxed. I inherited nothing but intend to leave a reasonably substantial sum to my children. Why should this be taxed twice? They seem intent on making us socially mobile downwards rather than making the less well off socially mobile upwards.
David Smith, Chinnor
A person works for his - or her - money, and pays tax on it as it is earned. He will pay tax (VAT, car purchase tax, stamp duty etc.) on anything bought with the money. If he chooses to give the money away to his children or anyone else on his death, then those recipients will pay tax on anything they buy with the money. The government will not lose any tax, they may just receive it at a slightly later date. Inheritance tax is immoral in that it is an extra tax on money, i.e. it comes between the income tax and the spending tax. Social mobility meant that I was born in a terraced house with an outside privy, and now live in a modern semi. I worked hard, saved and scrimped, and am now reaping the benefits of my labours. If I spend the money myself I am not hit by an extra tax, so if I give it to someone else to spend why should they be so hit? Where is the morality in that?
Inheritance tax is a virtue tax. It is a tax on the accumulation of the benefits of work. We need to focus on efficiency. Inheritance tax is completely inefficient. It impacts negatively on economic rationale. It has higher costs per unit of revenue because of administration, tax avoidance and tax evasion. If society was more logical in its thinking we would fund the exchequer purely using VAT. We should tax consumption - not productivity.
Moe Smith, London
I think most people accept that a tax in one form or another has to be paid and the only question is which tax? I have worked for nearly 40 years, getting into work early in the morning, working hard all day and not getting home until early evening. I got paid to do that and in some way I resented the government taking a part of it after all my hard work. An inheritance on the other hand is (generally) not earned, requires no effort and usually comes later in life when ones finances are typically more comfortable than, for example, in ones twenties or thirties. Given the choice I would far rather suffer IHT.
James Fox, Tonbridge
I did not inherit money from my parents but would like to pass on my own money to my daughter so that her life will be more comfortable than mine has been. I do not resent some of this being taxed at 40%.
Angela Grills, Glossop
The comments we publish are not necessarily the views of the BBC but will reflect the balance of views we have received. It is helpful if contributors state if they work for any organisation relevant to an issue discussed. Readers should form their own views on whether messages published represent undeclared interests, or views prompted by a common source.