Friday, 26 April 2019 09:36

Editor’s Comment: Taxman’s IHT greed needs curbing

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Editor Kevin O'Donnell Editor Kevin O'Donnell

Our story this week about the Treasury’s record IHT tax grab in the past year is a worrying portent of things to come, I fear.

According to analysis by NFU Mutual, IHT receipts for the 2018/19 tax year increased by 3.1% to nearly £5.4bn despite the advent of the Residence Nil Rate Band.

IHT grab jumps £164m in one year to £5.4bn

The IHT grab has gone up and up over the past decade. Government figures show that IHT receipts were just £2.7bn in the 2011/11 tax year so they have doubled in less than 10 years.

NFU speculates that fears over the threatened major increases in probate fees by the government is pushing some executors to speed through the paperwork to avoid any nasty probate costs. They may be right. Even so the IHT grab continues to move inexorably upwards.

My main concern is the direction of travel. Without efforts to change IHT policy more and more people will be dragged into the IHT net.

There is a view, one that I do not subscribe to, that IHT is a painless tax. You simply tax peoples’ estates when they die and they are not going going to complain. They have worked hard and saved during their lifetime so why not take some cash off them at the end. Simples.

I have no idea on how many families are now unexpectedly being hit with IHT bills when a loved one dies but I suspect it is rising sharply. The figures seems to suggest this.

Financial Planners are, of course, increasingly being asked to mitigate potential IHT liabilities and good advice can save families a fortune. As part of holistic, whole-life planning it’s absolutely right, of course, that people with estates get the right planning advice and consider where the money will go. I suspect many give large sums to charity but looking after loved ones will be a priority and planners can help with this.

Sadly only the few can afford to get this advice so what’s to be done?

Serious consideration needs to be given to scrapping IHT and the effort spent by the HMRC and others should be better spent on making sure that wealthy tax dodgers and global companies who avoid tax through artificial mechanisms pay their fair share if tax instead.

In addition, probate fees should not be raised to a level where the fee has no relationship to the work done by the government. If the fees are raised it is simply an additional inheritance tax and it is wrong.

The government, in a nutshell, needs to stop getting greedy where it sees large pots of money. Unfair and unpopular taxes have a habit of coming undone - just ask the doctors refusing to do extra work for the NHS because additional pension tax makes it far from worthwhile.

A review of IHT and it’s place in 21st century Britain is long overdue. It is no longer fair and needs to go.

Kevin O’Donnell is editor of Financial Planning Today and a financial journalist with over 30 years of experience.  

• PS, I’m taking part in a sponsored 10k all night walk in Manchester tonight to raise cash for a hospice which provides outstanding care for terminally and serious ill people. Find out why and how you can help here:

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Last modified on Tuesday, 30 April 2019 16:30
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