A year on from her economy-crashing 44-day premiership, Liz Truss and her faction in the Conservative Party are making a comeback.
These tax-cutting, small state libertarians want to see lower taxes to benefit the rich and reduced public services to the detriment of the rest of us.
They’ve been all over the media, focusing their efforts on attacking one tax in particular. They are lobbying the Prime Minister to abolish it. The tax in question? Inheritance tax.
Inheritance tax is described as one of the most unpopular taxes in the UK – the most unpopular tax by some accounts.
However, I’m going to try to convince you that inheritance tax, although flawed, is worth defending against the tax cutters.
Because there’s a greater issue at stake here: inheritance tax raises significant revenue for our public services. At a time when our NHS, schools and other services are stretched to their capacity, it would be reckless to cut their funding.
Will you have to pay inheritance tax?
Let’s start with some facts about inheritance tax. Firstly, hardly anyone pays it. More than 96% of estates never pay inheritance tax. Although one in three people think they will have to pay it. This gap between perception and reality may partly explain the tax’s unpopularity.
In reality, because of tax free thresholds and allowances, the vast majority of people can pass on up to £1 million to their children and grandchildren without paying any tax. Read the facts about inheritance tax on our blog.
Secondly, abolishing inheritance tax would only benefit a small number of wealthy people: let’s not mince our words, it would be a tax cut for the rich.
This week the Institute for Fiscal Studies estimated that if inheritance tax was scrapped, half the benefit would go to the top 1% of wealth holders, who would get an average of £1 million each in tax savings.
Inheritance tax funds our public services
My final point is this: inheritance tax raises important revenue for our public services. Currently it brings in about £7 billion a year. Forecasts estimate this will rise to £15 billion in ten years.
Large numbers can sometimes seem vague or even meaningless, so let me put these into context. £15 billion a year is half of the UK’s day-to-day defence budget; it is nearly 20% of the UK’s education budget. That’s a massive amount of money when schools are crumbling and you can wait weeks for a GP appointment.
Inheritance tax raises significant revenue for our public services. If it is abolished, it’s very likely that the money will have to be found from elsewhere (likely from higher taxes on working people), or that public services will have to be cut. I think you’ll agree that most people would support neither option.
We’re pushing back against the tax cutters
I understand that people have strongly held views on inheritance tax, especially as it is paid at a particularly difficult time for people as they’ve just lost a loved one. I do hope I have explained clearly why we at Tax Justice UK support it. We need to reform inheritance tax, not scrap it.
Our Executive Director has been on TV in recent days defending inheritance tax, and pushing back against the tax cutters. I was on TalkTV with Julia Hartley Brewer on Monday, you can watch the interview in full:
There’s a shorter version of the interview here on Twitter. We’d appreciate it if you could retweet it if you agree.
Our Head of Advocacy and Policy, Rachael Henry, was also on LBC with Iain Dale pushing back against abolishing inheritance tax. You can listen here.
Sign up to our free weekly newsletter: