18 August 2007

Death and taxes

The Tories want to abolish it but then they would, wouldn't they? Is inheritance tax such a bad thing? Should bloated capitalists be able to transfer the entirety of their ill-gotten gains to their trustafarian offspring? Or, to put it another way, should the modestly well-off middle classes be penalised for having accumulated a certain level of savings?

First point to note. If the estate in question passes to the husband or wife of the deceased, it is entirely exempt from inheritance tax. So there is no issue about widows or widowers being forced into penury by the rapacious grasp of what used to be known as the Inland Revenue.

Second point. Tax is payable at a flat rate of 40 per cent on the amount by which the value of the estate exceeds £300,000 (as of now; this ceilng is due to increase in future years). Accordingly, if the value of an estate amounted to £500,000, the inheritance tax payable would be £80,000 (£500,000 - 300,000 x 40%). Is this so unreasonable?

Of course, if your estate is worth £5 million, the inheritance tax is proportionately greater. In this case, the tax would amount to £1,880,000 (£5m - 300,000 x 40%). But I find it difficult to have any sympathy for those who are about to inherit over £3 million after tax.

Put it down to envy if you like.

More info here.

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