Increase in Inheritance Tax Allowances

 

Everyone’s got one. Mrs Williams. She taught me English in the fourth form. ‘Refrain from using the words “good” and “bad” – they are absolutes, they cannot be qualified. The teacher whose words stay with our forever. Everyone’s got one.

I’ve lived by Mrs Williams’s injunction for over 3 decades: until now.
In the last budget – the exchequer claimed it would increase the inheritance tax allowance on the principal family home to £1,000,000 per married couple.  This is merely a proposal, if it got through parliament, the increase would be phased in over four years.

 

Smoke and Mirrors

Piffle and dust. Hers’s the tragedy of it: this policy was concocted by some of the best brains in the land. What were they thinking? They read PPE at university. This policy treats of sub-section of a certain class of asset differently from all other assets. The benefit would be short term. Short term and illusory as it would be, the benefit would accrue only to married couples, who had children. The benefit would only apply to the family home. The current inheritance tax threshold has acted as a brake on house price inflation – few houses sell for just over £325,000 or just above £650,000. Estate agents know it, conveyancers realised it, land registry folk perceived it. Even schools admissions officers are familiar with the concept.

The people at the treasury ignored basic truths of economics.  This smoke and mirrors attempt at easing the tax burden would increase house prices for [almost] everyone. In a few years, there would be no tax reduction. The increase in house prices would have eroded any benefit from the increase in the threshold.

The tax saving would be for a few families who manage to schedule the relevant deaths in the narrow window of say the next five years. How mercenary.  This is mere pretence. The treasury folk are too bright not to anticipate the inflationary consequence. It’s the law of unintended consequences – not the law of unforeseen or undesired consequences. I don’t mind people being stupid – they can’t help it. What gets me is when people pretend to be stupid.

Knowledgeable people have refused to get excited about this increase in the inheritance tax threshold. It’s no such thing. It’s smoke and mirrors. It’s piffle and dust.

I’ve abided by Mrs Williams’s injunction for over 3 decades: I’m moved to break my teacher’s rule. The proposed policy by which the inheritance allowance would be increased is bad. It is bad politics borne of bad economics married to bad philosophy. It is a display of presentational legerdemain of which Lyndon Johnson would have been proud. My English teacher was right. This policy is bad. It’s badness [it’s  a neologism] is absolute. It’s badness cannot be qualified.

Notwithstanding the shabbiness of this policy, contact me if you wish to make the most of the current inheritance tax rules. Neither you nor I make the rules, but it would be wrong of us to knowingly pay more inheritance tax than the laws and rules say we have to.

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