Taxing inheritances.
I understand the Tories are about to discuss inheritance tax today
Many years ago I heard a suggestion, I can’t remember from whom, but probably the Liberal Party, which I found it very attractive.
The proposal was that inheritance tax should be charged not on the estate leaving the bequest but on the recipients receiving the bequests (note the plural.) The recipients would be able to inherit modest amounts tax free, but pay tax on big bonanza inheritances, or a multitude of modest ones.
Thus, if we define a “modest amount” as, say, £50 000 (though that’s beyond the dreams of avarice of many people) then an estate of, say £1 000 000, not all that unusual nowadays, given the price of houses, would not be taxed at all if the bequests were in 20 different bundles of £50 000, but would pay the current rate (40%?) if the whole million went to one lucky recipient.
This would go some way to reducing inequality in our society, and probably increase the level of happiness. It would also probably encourage innovation, as potential entrepreneurs would have the wherewithal for start-ups.
Monetary bequests should simply be treated as income for the recipient and taxed as income at standard income tax rates.
ReplyDeleteBequests of property not be taxed at all when they are given but when they are sold they should be subject to capital gains tax on the full gain from when they were acquired to when they are sold, ignoring the transfer of ownership due to the inheritance.
So someone who bought a house for £50,000 which is now worth £1,000,000 could pass that house to their child who could live in the house and not have to pay any tax, but if they ever sold it they would pay capital gains tax on the whole increase from £50,000 to £1,000,000 (ie, no revaluing occurs when it is transferred by will).
I've always thought this was an idea worth looking at seriously
ReplyDeleteAs you say it might encourage a wider sharing of wealth (although I doubt it would impact much on the low income families) and also stimulate consumption and then production
I'd also like to see it applied across the board - including the so-called royal family
Now there would be a policy I'd vote for
I've long thought that out whole tax system needs a rethink
ReplyDeleteIt's grown arm and legs over the decades with various govts just finding new things to tax for revenue purposes
Income tax is one place to start.
In England there are only 3 tax bands (4 if you count 0%) with a big change when you move from to a higher one - particularly from 0 to 20 and again from 20 to 40 with potential disincentives for people marginally increasing their income
The technology today means it is entirely feasible to have a much more graduated scheme where your personal tax code can be regularly updated by HMRC rather than the once a year that usually happens
Say 5% increments every few thousand £
eg £12570 0%
up to £15000 5%
up to £20000 10% etc
Automated payroll systems would have no problem with, say, monthly or quarterly adjustments