I’m not worried about inheritance tax – I’m worried about the millions of families facing financial crises and poverty today
house prices and weather, which I totally agree with; I endlessly debate whether the weather is too hot, too cold, too wet, too dry, too windy, and occasionally perfect.
House prices, weather and inheritance tax – we Brits are obsessed.
House prices offer both smug satisfaction for those who have benefited from the dizzying rises of the past 50 years and bitter frustration for those mired in negative equity following the Northern Rock debacle, along with those raking in thousands of pounds a Spend month rent who can’t afford to buy.
Inheritance Tax (IHT) though? The so-called death tax is hated by almost everyone and found by most to be deeply unfair and worrisome. But it’s confusing that so many of us even care.
The latest figures from the Office for National Statistics show that in the 2018-2019 tax year just 3.7 per cent – 22,100 – of deaths in the UK resulted in an IHT charge, down 0.2 percentage point from the 2017 tax year corresponds to 2018.
That’s less than four out of 100 people.
Perhaps it’s the amount of money IHT raises for the government that gets people’s attention. Figures released today by HMRC show that the Treasury took £6.1 billion from estates paying inheritance tax in the financial year April 2021 to March 2022.
I have seen various explanations for why IHT revenue is increasing, in fact last year revenue was £700m more than the same period last year.
Some point to rising house prices (our favorite) pushing the value of more land above the zero-rate band and the zero-rate band for residential real estate.
These allow qualifying individual estates to be transferred in aggregate up to £500,000 and a surviving spouse’s or registered civil partner’s qualifying estate up to £1 million to be transferred without incurring IHT liability.
The government has frozen these thresholds until 2026, citing its reason as “part of the fair and sustainable approach to rebuilding public finances and continuing to fund excellent public services”.
It’s the same “fair and sustainable” approach that will see the majority of UK income taxpayers see higher social security in their pay packages from next month.
Yes, it’s likely that house prices will increase through 2026, which will result in more properties crossing the IHT threshold, but let’s put that in context.
Income tax receipts totaled £239bn last year, social security contributions £157bn – the highest ever – and VAT £101bn. IHT’s £6bn are not in the same league.
I have no doubt that Death Tax haters won’t give a damn that IHT really is a “My diamond shoes are just too tight” First World problem. People will continue to hate and worry about it.
I’m not worried about inheritance tax — it’s a problem affecting the beneficiaries of only 4 percent of the estate, and it’s a problem for tomorrow at that. I worry about the problems that an estimated four out of five of us face today.
ONS figures show that 83 per cent of UK adults reported an increase in their cost of living in March 2022. The Resolution Foundation estimates that another 1.3 million people will fall into absolute poverty in 2023, including 500,000 children.
An analysis by Citizens Advice published in November last year suggested that one in ten families – the equivalent of 3.2 million households – had already faced a financial crisis six months ago.
A further 380,000 households were left with less than £50 each month after covering their basic living expenses, putting them at risk of hardship in the event of an unexpected bill.
We’re on the verge of a Social Security hike from 12 percent to 13.25 percent – that’s a whopping 10 percent – and with income tax thresholds frozen and inflation at 10 percent, things are really grim for millions of households.
Calls for the government to back down are deafening.
But with the economy still reeling from the pandemic, Rishi Sunak is highly unlikely to heed it.