Inheritance Tax proposal
The inheritance tax threshold is to rise to £1m. The proposal will cost around £4bn, which is going to be funded by an annual levy on the right to declare yourself 'non-domiciled' for tax purposes.The proposal is very skewed towards the rich. In 2004/2005, 5.4%, or 32,000, estates paid inheritance tax, which raised £3bn. Of this 2,700 estates of over £1m paid £1.3bn. The beneficiaries of these super-estates will under Osborne's proposal receive an extra £280,000 or so. 6,722 estates over £0.5m paid just under £1bn, an average of £142,000 each, which they would now not have to pay.
I can't agree with in terms of good governance. All taxes have opportunity costs. The opportunity costs of this seems particularly extragavant. It would (on 2004/2005 figures) lower the tax of people inheriting between £0.5m and £1 by £142,000 on average, and of those above £1m by £280,000 on average. The money foregone here, from less than 10,000 estates, could have been used to cut income tax by 1-2p in the pound for millions of hard working families.
The more thoughtful advocates of such a proposal note that with rising house prices more and estates would be subject to inheritance tax. Yet this means that income tax could have been lower and lower. I'd rather tax bequests (often simply due to house price inflation) than productive work.
Labels: inheritance tax, Taxation
posted by Matthew @ 10/01/2007 12:07:00 PM
Comments: 8
