The Moral Maze is broadcast on BBC Radio 4.
For those who might be interested, I am on tonight's programme discussing inheritance, and Inheritance Tax.
The broadcast is at 20.00 UK time. It goes out live, and I look forward to comments tomorrow.
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Look forward to it, Richard. Hope you will point out that the inflated house prices which form so much of current legacies are entirely unearned income to the deceased let alone the inheritors. Why is there so much fuss about paying tax on unearned income, yet no one seems to think it’s wrong to tax earned income? Perhaps these people would prefer an annual wealth tax like they have in France and other countries. Wealth taxes meet most of the criteria for a good tax, unlike those which currently apply.
I predicted that you would be on the Moral Maze after Hecklers. Well done – don’t forget to declare all these fees in your tax return……..LOL
‘Roger’
You’re right! You did.
So what’s in the next budget?
And who is giving it?
And when? 🙂
Richard
are you going to be provocative? I was rather looking forward to seeing Chelsea lose, but if you are going to be more entertaining!!!
“Why is there so much fuss about paying tax on unearned income, yet no one seems to think it’s wrong to tax earned income?”
– There is only income if the house is sold, or do you suggest those inheriting property bury it under a loan, they may or may not be able to afford? What if the value of the property drops, do they get a rebate on the tax paid once they finally do sell it?
“Perhaps these people would prefer an annual wealth tax like they have in France and other countries. Wealth taxes meet most of the criteria for a good tax, unlike those which currently apply.”
– How is it fair? It punishes the savers. Take two families. One spends every Dollar/Pound/Euro they earn and the other saves. Then one day, the Government goes to the saver and informs hom that he has too much money and needs to give some back as wealth tax. You can argue that the spender also paid tax in the form of VAT, but at least he has whatever he bought with the money to comfort him in exchange.
Alastair
I’m not going to have my tummy tickled!
Richard
Fred
You’re living in a fantasy land
1) You assume childen move into their parent’s houses? Given average age at death what do they do during the first 55 years or so of their lives?
2) My guess is 98%+ of all homes subject to second death estates are sol. Let’s stop this nonsense that we’re taxing the passing on of the family home.
3) For those with a heritage house there are exemptions.
As for your wealtyh tax example – that too come sfrom Mars. Since when has conumption been part exchangeable for a start?
Please refer to reality, or your comments will be blocked.
Richard
“1) You assume childen move into their parent’s houses? Given average age at death what do they do during the first 55 years or so of their lives?”
– At the moment, I am one of 4 sone. I live in a rented house. #2 owns his. #3 lives lext door to my parents, who own the house he lives in, which by the way was willed to my parents. (They had to take a mortgage on it to settle the tax lean that was slapped on it immediately when the owners died.) #4, lives at home whith our parents. I also live there when I am in New York as I still maintain my own room. (I’m 36)
– So should only the son who owns a house pay tax?
“As for your wealtyh tax example – that too come sfrom Mars. Since when has conumption been part exchangeable for a start?”
– By consuming, people never get wealthy and are not subject to the wealth tax. They do not need to purchase items. How about taking vacations. This way, there is no accumulated assets to tax later on.
“Please refer to reality, or your comments will be blocked.”
– If the comment option is only here to pat you on the back for putting forward more ways to tax people and not for discussion, then go ahead and ban me. It will give me something to blog about. (If my comments are so out there, what are you afraid of.)
Fred
Please feel free to blog at your leisure
But I stick to my guns: you clearly don’t understand Inheritance Tax.
Richard
Fair enough. Then again, I have never inherited anything.
Fair disclosure: I have.
£1,000.
Richard,
On the moral maze you said that you had never advised your clients how to minimize their tax. Can I ask how you managed to build up a sizeable accountancy practise without advising your clients on tax?
Roger
Interesting programme Richard. Can’t say I thought there were any winners, although you spoke well. I guess Melanie Phillips and you will not be exchanging Christmas cards?!
Heard the Moral Maze – V good defence of using a range of taxation (which irons out some of the inequities of using only a few). BTW I’m a fellow accountant… Taking this a little further there is another source of inequity because “capital” profits (including Inheritance Tax) are taxed so differently from income – employment income so differently (for NI) compared with sole trader/partnership and “unearned” income so differently from earned? The various inequitable arrangements to avoid tax (eg by taking profits by dividend) might arguably decrease dramatically if the various incomes fell into similar tax rates, with similar exemptions except where there’s a good case for an alternative… edddd
[…] I’ve been asked how I could say as a practicing accountant that I have not done Inheritance Tax planning. […]
Ed
I agree 🙂
Richard
Few things in life provide more satisfaction than listening to the hectoring and humourless Melanie Phillips having her arguments so comprehensively and humiliatingly destroyed.
No-one’s going to enjoy paying any tax, but at some point you’ve got to decide whether to tax people for EARNING money, or whether to tax those who, for doing nothing at all, have large amounts of money fall into their laps. Taxing inheritance out of existence would be a huge, fabulous step towards creating a level playing field for all.
You cannot tax inheritance out of existence, unless you want the state to own everything in a socialist country. The purpose of taxation on inheritance in a capitalist democracy ought to be to spread more widely in each succeeding new generation the private ownership of unearned wealth – wealth that is neither created, earned, made nor saved by the beneficiary.
Would you agree that the average wealth of every adult and child in the UK is currently about £90,000? It was reported by the Office for National Statistics to be £85,000 in 2002, according to a report in The Times. I have not seen a later report than that, but would like to.
I am sorry that I did not listen to Moral Maze, but I did watch Jonathan Dimbleby’s programme on TV last night. What applause there was for the comment from a young man in the London audience that Inheritance Tax is double taxation!
Yes, Inheritance Tax IS double taxation so far as donors and bequeathers are concerned. But so what? So is VAT, Council Tax, Car Tax, etc.
Inheritance Tax is NOT double taxation as far as beneficiaries of unearned capital – probably including the young man making the comment – are concerned.
What confusion – so convenient for selfish better off families – is caused by calling the tax on giving an ‘Inheritance’ Tax!
There should be two taxes: a Capital Gifts and Bequests Tax (CGBT) and a Capital Receipts Tax (CRT), with the former offsettable against the latter. Two taxes will, amongst other things, clarify what is and what is not double taxation, help prevent avoidance and (perhaps?)deal with difficulties with trusts and gifts out of income. What is income to some is capital to others.
There is absolutely nothing wrong with a CGBT as a double tax to tax the luxury expenditure of generous giving at a flat rate of 10% (less than the 17.5% VAT on other expenditure) with intra-generational exemptions (partners, spouses, etc) but no inter-generational exemptions – to replace and rename the exemption ridden 40% IHT. There is everything right in using the proceeds towards a basic minimum British Universal Inheritance (BUI) of 10% of average wealth to all young British-born adults at 25. “If any young adult deserves an inheritance, then every young adult deserves an inheritance” . (Dane Clouston).
To achieve this there is absolutely nothing wrong and everything right about a CRT that is negative (£10,000 receipt at 25) and progressive (starting at 10%).
Result? £10,000 less 10% tax for all at 25, gradually repaid by 10% CRT up to an effective tax-free net personal allowance of £90,000. None of this repayment paid by beneficiaries, since 10% has already been paid by donors. CRT at higher rate bands, according to political taste, payable net of the CGBT 10% withheld from donors.
Result? Greater equality of opportunity and the wider spread of the private ownership of wealth in each new generation, more home ownership, more entrepreneurial activity, education loans repaid more quicly, less alienation, less financial and social exclusion, less asset poverty gap, less income poverty gap, less welfare state needism, asset welfare state leading to less expenditure on income welfare state. Less dynastic capitalism: more popular capitalism.
The parameters of tax rates, BUI amount, tapering during the introductory period, etc. can be finessed to make the proposal broadly self financing, according to political taste. Which party will go for it first? One Nation Conservatives or Non-socialist New Labour? The Times leader yesterday said that “if the Prime Minister is smart, he will now embrace the language of opportunity and wealth”. The Conservatives seem, for now, to be heading in the opposite direction – more starting wealth for those who already will have. We shall see in due course who is smart and who is not.
DANE CLOUSTON
Director, OPPORTUNITY – The Campaign for British
Universal Inheritance
http://www.universal-inheritance.org
Granted, “taxing inheretance ‘out of existence'” is a slight exaggeration. 😉 The central point – that rates should be a lot higher – stands. You really should listen to the programme – it is still available at http://www.bbc.co.uk/radio4/religion/moralmaze.shtml. You will find the standard of debate to be considerably higher than in Dimbleby’s programme last night. My point is NOT the one which Melanie Phillips tried to accuse others of on the programme – that one person’s wealth equals another person’s poverty. Economics, she rightly pointed out, is not a “zero-sum” game. My point, however, is related…. it is that one person’s unfair advantage equals another person’s unfair disadvantage.
A lot higher than 40%? Given average weatlh of every adult and child in the UK of aroune £90,000, the British Universal Inheritance negative and progressive Capital Reciepts Tax would start at £10,000 receipt and 10% rate which would go upwards according to political taste. What tax bands and rates would you suggest? I do not know how much of the next £1/£10/£100 million unearned capital receipts anyone needs. What rates and bands would be politically acceptable? The higher the rates the larger can be the British Universal Inheritance for all 25 year olds. Once the idea is introduced, a proper democratic debate will determine the changing parameters of a broadly self financing scheme. The parameters will of course be different according to whether it is introduced by a One Nation Conservative Party or a non-socialist New Labour Party
Hi
I tuned in to the moral maze pretty much randomly and heard the show – without wishing to flatter, you were devastating. The programme had a clear winner – and it was the argument for an inheritance tax. A great contribution on your part; it really exposed the threadbare nature of the anti inheritance tax case.
Keep it up!
Chris
Chris
Thanks
Richard
Quick question. Is it possible for a parent to sell their home to their children for a trivial sum? If so, how would it be taxed? Theoretically, there would be no profit until the child sold, and then it would be substantial.
Also, does the tax in the UK differentiate between an estate with one or multiple beneficiaries? If it is based on the value of the estate, it sound kind of unfair in cases where the estate is being split between four instead of one receiving everything.
To find myself agreeing with the blog author on anything to do with tax has caused me to have a lie down. Yet, I wholeheartedly agree with his sentiments. There is not much worth adding save for the repetition of what I felt was a particularly astute observation by David Abramovitch, writing on the Times a a few weeks ago. In response to the argument, put forward by too many, that parents have a moral right to leave their “hard earned” homes to their children, Mr Abramovitch pointed out that this very same argument was once present in the closed shops operated by the print and other unions, and where jobs were once inherited, but no more.
Fred
I am afraid it is not the purpose of this site to provide free Inheritance Tax advice, and nor do I have time to explain the basics.
I am sure you can find these answers elsewhere.
Richard