Among the most eye-catching measures of the British government’s recent budget is an inheritance tax (IHT) giveaway. IHT is currently levied at 40% on assets above £325,000 for a single person, or £650,000 for a married couple. But the addition of a new “family home allowance”, worth £175,000 per person, means that couples may soon be able to pass on a £1m property tax-free.

The argument for easing up on the Inheritance Tax (source: The Times, London):

House price inflation means that ever more family homes are attracting “punitive” death duties (nearly 400,000 homes in the UK are worth £1m or more). Most people buy family homes using income that has already been taxed. They then pay a big whack of stamp duty, followed by regular payments of council tax. And then, when they die, the state demands death duties on the house too. It’s not right. “A home that you can own and pass on to your children is a just reward for an industrious life.”

The argument for a meaningful inheritance tax: (source: Janan Ganesh in the FT)

Another way would be to say that someone who has had the “dumb luck” to inherit a million pounds has done absolutely nothing to deserve it. So why should they get their windfall tax-free when someone who risks their savings to set up a successful company, and then sells it, would be taxed on the capital gain? “Bequests of capital give privileged children, however gormless and mediocre, a crushing advantage”, helping to sustain a self-perpetuating,“ossified upper middle class”. If the Tories are serious about wanting to be a party of opportunity and of hardworking people, they can’t oppose IHT. They have to start discriminating, between those who earn their money and those who get it by chance.

Tomorrow I will post an excellent letter on the subject.