The Express reports that 50 percent more families are being hit by inheritance tax (IHT) due to the ongoing increases in house prices tipping many estates over the frozen IHT threshold.
Pointing to such concepts as taxing already taxed money, many families with large estates would dearly love to see this tax axed.
The overall tax system is (or should be) designed to be fair to all when extracting money from individuals and businesses in order to redistribute it for the good of our society as a whole. But some things do seem unfair depending on where you sit on the wealth scale.
Is it fair for poor people to have to pay VAT to buy stuff when they have already paid tax on that money via income tax and/or national insurance contributions?
Is it fair to have to pay insurance premium tax out of money (income) that has already been taxed?
Is it fair to pay fuel duty on money that has already been taxed and then, to put icing on the cake, pay VAT on the combined cost of the fuel and the fuel duty (a tax on a tax)?
Is it fair to pay stamp duty on shares or land out of previously taxed money?
The list goes on, but whatever your view on individual taxes the overall concept is that money is taxable when it changes hands – and that goes for inheritance tax too. Just because your parents have money does not mean it it is yours.
The other point to note is that without these huge property gains many of these estates would probably still be below the IHT threshold.
Apart from keeping society going tax also has another function, that of discouraging the unwanted. Is general health bad due to smoking, drinking, sugar and salt – then the consensus seems to be that we should tax them to keep our spend on the NHS down. Traffic congestion and emissions too high, then tax transport. You get the idea.
Now, it is acknowledged that a huge and nationally damaging house price bubble is forming, so it seems logical to use tax to address it – or at least let the state take a slice of the benefits.
Then of course are questions like where would the government raise taxes if IHT were to be abolished and whether a whole new set of hugely permanently rich family dynasties would be formed over the coming generations at the expense of the majority. Or do we think it fair that one person can make a great fortune so that their maybe average offspring and heirs can live it up without having to put anything into society other than tax taken from their forebear’s work? Or would it be better to have a system that facilitated putting that money into the hands of someone who would do something more productive with it?