So the Tories are looking to scrap inheritance tax on homes worth less than £1m. While I applaud the move to culling this obscure, unfair tax for most, I find it despicable it’s still being enforced at all. I don’t care what you level of wealth you’re looking at – it’s an outdated, strange concept to me.
It shouldn’t be just property either. Why not kill tax on all forms of wealth inheritance?
Chancellor George Osborne has talked frequently of his plans to remove family homes worth up to £1m from inheritance tax which, as George says, “supports the basic human instinct to provide for your children”.
Stand and deliver
I couldn’t agree more. But why only on homes worth up to £1m? I don’t see it as something that can possibly be waived for one group and not another. It is a moral, ethical stance. You simply shouldn’t have to burden your kids with tax on anything you choose to pass on to them.
We live in an age where we are punished – or our living beneficiaries are punished – for inheriting the wealth we have worked so hard to acquire and accumulate while we’ve been alive.
You Cam talk
Prime Minister David Cameron seems to agree: “You want to know that even after you’re gone, when you’re not on the phone and not physically there, you can still provide for them. That wish to pass something on is about the most basic, human and natural instinct there is.”
But only up to a certain value, right Dave? Sorry, I don’t buy that one iota. I’m all for the fair sharing of wealth and anyone with a £1m home is no doubt pretty well off but you can’t say it’s a fundamental human right and then qualify who it will be applied to. That’s bizarre and discriminatory.
Pension chaos on the horizon
This, coupled with the new pension freedoms, is going to cause havoc. Anyone sitting on a half-decent pension pot is now broadly-speaking faced with two options:
1) Play safe and trade in your pension for a guaranteed regular income (an annuity) but know you’re unlikely to get full value from all your many years’ savings; or
2) Aim to eek out as much value as you can from your pension pot by spending it in your retirement so you don’t die sitting on a hefty chunk of cash that your family could be heavily taxed on when they inherit it.
Spend, spend, spend!
The big danger is that the majority plump for the latter. And while death and taxes are certainly the only two certainties in this world, as the old adage goes, you can never be certain WHEN you will leave this earth. I foresee a lot of people burning their pension pots dry in 20 years and then they happen to live another 20. Who’s going to pay for it? It will clog up government schemes to house and keep these people in their final years.
At the other end of the spectrum, those paying inheritance tax when their parents pass on, will not be able to sustain and pay for the millions living out those remaining years in abject poverty and utter misery.
One tax for all
It’s not a particularly cheery thought, I grant you. And there’s no easy solution. But I believe there is one way of making things much easier for people to understand, and to give everyone clearer responsibility for mapping out their finances. Have just one tax. Income tax.
Continue a graduated system of income tax, where those earning more pay more on higher amounts, and by all means increase the actual percentages, but keep it to just one tax. There’s no need for separate inheritance tax, VAT, or stamp duty when you buy a house – why on earth should you be effectively punished for that too? And there’s no need for national insurance.
As you earn your money you plan to accrue a certain amount that will see you through life and if you know anything you have left when you die will go to your offspring completely free of tax then you’ll not suffer that anxious dilemma of do I / don’t I spend the loot and get my money’s worth.