According to the figures discussed in this video, just 4.72% of deaths resulted in an inheritance tax charge in 2023–24. More than 19 out of every 20 estates therefore paid no inheritance tax at all.

The headline 40% inheritance tax rate can also be misleading. Allowances mean substantial amounts can potentially be passed on without inheritance tax, while the 40% rate applies only to the taxable portion of an estate above the available thresholds.

I argue that the bigger question is why inherited wealth should receive greater political protection than income earned through work. Inheritance is wealth received because of family circumstances rather than something the recipient has earned through employment.

Meanwhile, Britain faces problems with housing costs, insecure work, stagnant wages, struggling public services, poverty and substantial inequalities of income and wealth. Cutting inheritance tax does little to address those problems.

There can be legitimate debate about how inheritance tax should operate and whether it needs reform. But making it a flagship political issue tells us something about the priorities being placed by the Tories  on inherited wealth compared with the economic insecurity experienced by many households.

The question is not simply whether inheritance tax should change. It is whose economic problems politicians choose to prioritise.

This is the audio version:

This is the transcript:

The Conservatives are holding their conference this week, and they have chosen the wrong crisis to focus on. Kemi Badenoch apparently wants to use cuts to inheritance tax as a mechanism to drive a Tory revival. But the fact is that fewer than one estate in twenty pays inheritance tax in the UK right now, and Britain has much bigger problems. The choice that Kemi Badenoch has made reveals who the Conservatives are thinking about.

There is no inheritance tax crisis in this country at present. Just 4.72% of deaths resulted in an inheritance tax charge in 2023-24 tax year, which is the last one for which we've got data available. That means one in twenty people who died had to pay inheritance tax on their estates. That means that more than 19 out of 20 people paid nothing. And yet the Conservatives apparently see this as a flagship issue, which will have people rallying to their cause. That political choice needs explaining.

Many people just don't get the worry about inheritance tax, and I don't either. Most people have plenty to be worried about in this country at present, and that is what they're concerned about, and inheritance tax isn't.

For example, young people face insecure work and unaffordable housing.

Millions of households are struggling with food, energy and everyday bills, because we have a cost of living crisis.

And public services, from education to health to the justice system and more, are failing too many people.

Inheritance tax is nowhere near the biggest concern of almost anyone in the UK, and when we come to inheritance tax itself, much of the data is misleading.

For example, people say you pay it at 40%, but that is the headline rate. The reality is that everybody has a basic allowance for this tax of £325,000, meaning they can pass on that much to their heirs without any tax being due. And by the time you add in an additional £175,000 per person if they previously owned a private property, and you allow the fact that these allowances can be transferred between spouses in a marriage or civil partnership, it's possible to pass on up to £1 million tax-free in current inheritance tax law.

Not many people have £1 million to pass on.

What is more, even the estates that are affected do not pay tax at 40%. They only pay tax at 40% on the excess sum over the allowances that they have available to them. So, for example, if the estate is worth £1.5 million, and there are total allowances available of £1 million, only £500,000 is subject to the tax, and £200,000 is paid.

The whole 1.5 million pounds is not subject to a 40% tax charge, and as HM Revenue and Customs say, the average effective overall tax rate on the estates in the UK was just 13% in the last year for which we have data. The supposed 40% tax burden, therefore, gives a false impression. This is a tax on a small minority of people in the UK with substantial wealth, with the charge being at a very low overall rate. There is then no national emergency requiring a tax cut when it comes to inheritance tax in this country.

Britain does have real economic problems, though housing costs are extraordinarily high. Real wages have stagnated, and economic insecurity is widespread. Healthcare and other public services are under severe pressure, and income and wealth remain profoundly unequal. Those are the issues that need to be looked at, but what is also clear and which is ignored by the Tories is the fact that when we come to inheritance tax, there is a problem with it, which is that this is unearned wealth.

In effect, the inheritance tax charge is not paid by the person who dies. They are, after all, dead when the liability falls due. It is paid by their heirs. Now, no one chooses the family that they are born into, and no one works to earn an inheritance before receiving it. And yet earned incomes are taxed as a matter of course, but inherited wealth is, according to the Conservatives, something that we should get with little or no tax charged upon it.

Why should unearned wealth receive greater political protection and favour than work? That is my question.

Why should a person earning £13,000 a year begin to be paying income tax? And why should people be paying national insurance on incomes lower than that when up to £1 million of wealth can be distributed by an estate with no tax charge arising? This is unjustified, and it distorts our economy, our society and values by placing an emphasis upon the interest of the wealthy and by creating greater inequality.

But this does tell us what the Conservatives value. Let's be clear. What this proposal represents is their priority on preserving accumulated private wealth. They want more of that wealth passed between generations. They appear less concerned about those without inherited wealth, and that is a revealing political choice.

This is not a programme for a sensible government, is my point. No government should worry about those who have wealth and who can survive when there are people in this country struggling in poverty and who cannot thrive.

It would be wrong to focus upon inheritance tax, and it would be wrong to do so at a time when we have massive skill shortages in this country and housing, work, healthcare and education matter much more to millions of people, not least because having those things is the precondition of them being able to work so that they can generate enough income with which to maintain themselves.

Making large inheritances even larger addresses none of the problems that we as a society have, including, of course, the failing of our public infrastructure and climate change, both of which demand increased taxation to tackle inequality because those who are opposing those measures are very often those possessed of large wealth, who use that wealth to try to lobby against those things that we need.

The real issue is who the Conservatives are hearing. I'm not disputing that inheritance tax can be the subject of reasonable debate. It is possible to argue that changes are necessary. I am not worried about that. I'm not saying that should not happen, but making this a flagship policy reveals the party's priorities.

The Conservatives are hearing the wealthy few and not the anxious many. That helps explain why they have become such a fringe party now, falling well down the list of priorities for most people when they think about going to the ballot box. They are running at third, and they might fall further still. They are on the fringe, and they will remain there. The fact is that the old one-nation Tory party that people did like and did return to power is no more, and this policy proves that fact. This is a party for the wealthy, and it is a party for no one else.

That's what I think. What do you think? There is, of course, a poll down below. You can disagree with me. Do so in the comments if you wish. We do look at these. We do analyse them. Please do like and share this video. Please do subscribe to this channel, and please do hit that bell button because then you will be told when we've made more videos. And if you'd like to support our work because you think what we are doing is valuable, there is a coffee or Ko-fi button down below this video, so you can click that link and make a donation to help us do our work. Thank you.

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