October 16, 2014 by Paul Goldsmith
Just when I thought the Conservative Party had run out of ways to write the Labour Party manifesto, they have decided to turn their attention to inheritance tax relief again. For some reason, they seem to be happy to announce £3 billion pounds of tax cuts that will overwhelmingly benefit the wealthy whilst also announcing cuts in benefits for those on low pay and the unemployed and the sick. Sometimes I think the Tories have given up trying to help people who need it and are receding into a parody of themselves.
Inheritance tax is levied on wealth over £325,000. Your descendants pay 40% of the value of all assets over that amount when you die. This means that you can work for all your life to make your family comfortable in the future and have the Exchequer take a large proportion of the wealth that you have worked to build up. Yes, there are many ways of avoiding inheritance tax, including combining you and your spouse’s allowances and a variety of rules that means you can for instance pass the wealth on before your death and have less inheritance tax paid on it depending how long you died afterwards. But a tax that was created only for the rich has crept up on Middle England, and now on even the lower paid, particularly in London, where the average house price is double the price of the £325,000 threshold, and even the South-East has seen their house prices rise above it. So, when people die they leave behind a large tax bill for their dependents which has to be paid, often by selling the family home. This can seem unfair.
But look at it the other way. Inheritance is what someone gets as a reward for having been born to someone who has worked hard, or being the descendant of someone somewhere who has done so. It is not a reward for effort, it is in fact wealth that ‘falls into our mouths as we sleep’. It is, essentially unearned wealth. It is this unearned wealth that David Cameron wants to lower tax on. Somewhere, he is going to have to find the £3 billion that it costs. Where will he find it? Where do you think?
No, this is about votes. Shoring up the votes of the Middle class, votes that they might need in marginal seats. This is also, sadly, about looking after people that shouldn’t need looking after. Cameron argues that people “should be able to pass on their homes to their children.” Maybe so, but what is he doing for people who can’t afford their rent, for whom owning a home is a pipe dream. I see little. I would not be surprised if Labour jump on this. Even with their accident prone leadership, surely they can see this as a gift to them even more valuable than inheritance assets.