Inheritance tax would be 'all but abolished'
Conservative plans to slash inheritance tax would effectively abolish the tax "for practical purposes", shows research by the leading accountants, Grant Thornton, for The Independent. In the proposals by the shadow chancellor George Osborne, unveiled in 2007, the threshold would be raised from the present £325,000 to £1m.
That means the yield would drop below £1bn – compared to £3.9bn taken in inheritance tax in 2007 – raising questions about where the Conservatives might make up the shortfall as they seek to tame the budget deficit run up by New Labour.
Last year, Kenneth Clarke, the shadow business spokesman and former Tory chancellor, said such concerns would leave the proposed cut as an "aspiration". But a poll of Tory candidates suggests there is still much pressure to deliver the pledge early in the life of a Cameron government.
Both the present arrangements and the Osborne plan permit the transfer of a spouse's allowance on their death, making a combined threshold of £650,000 (under the present rules) or £2m (under Osborne). But at £2m, the number of estates affected plummets to perhaps 3,000 a year, and the very rich tend to be able to plan their tax affairs to avoid the levy completely.
Mike Warburton, the director of entrepreneurial services at Grant Thornton, said: "For all practical purposes, inheritance tax would be abolished under Mr Osborne's proposals. Whichever way you look at it, they would make inheritance tax a tax on the rich rather than on the mass affluent."
In the last year for which there was detailed information, 2006-07, there were 49,782 estates worth more than £300,000, but only 5,009 above £1m. Mr Warburton added: "If there were only 5,000 or so deaths with estates over £1m, and 35 per cent of these had a spouse exemption available, it means that with an incoming Conservative government and with a £1m transferable threshold, only about 3,000 estates would be caught for inheritance tax."
The take from inheritance tax peaked in 2007 at £3.9bn, but has been falling in any case, thanks to Chancellor Alistair Darling's decision to raise the threshold shortly after Mr Osborne's announcement, widely credited with derailing plans by Gordon Brown for an early election in the autumn of 2007, the "election that never was". Depressed stock markets and the slide in property prices in 2008 have also reduced revenues.
Contrary to the image sometimes conjured up, death duties, the precursor to inheritance tax, were once paid by a much larger slice of the population than is now liable for inheritance tax. The earliest records, going back to 1939, show that about 30 per cent of the relevant population were caught in the death duties net.
Mr Warburton said: "We now have the rather surprising statistic that, in the 12th year of Labour, we have the smallest number of families caught for inheritance tax and its predecessor taxes since records started 70 years ago."
filmFilm producers sue Warner Bros for $75m over Hobbit films
sportNapoli 2 Arsenal 0: Gunners must now face either Real Madrid, PSG, Bayern Munich, Atletico Madrid or Barcelona in knock-out stages
Swedish stars ask fans for £195 pledges on crowd-funding website
voicesJust when you thought you could find a man, get married, and have a baby by the age of 35... it turns out you’re too late, says Grace Dent
musicAs Mariah Carey and Noddy Holder rake in the royalties from their classics, why there hasn't been a decent festive hit for 20 years?
theatreAuthor Daniel Rosenthal recalls the mishaps that almost brought the curtain down on the likes of John Gielgud and Diana Rigg
lifeAs the Royal Mail plans to phase out deliveries on two wheels, it's no wonder posties are in a spin
musicThe 21-year-old beat Ella Eyre and Chlöe Howl to win the honour
lifeFull of the joys and want to help your fellow man? December isn't the time to do it
techLuke Blackall reports on precision engineered prams and babygros that monitor your child 24-7
Nelson Mandela memorial: ‘Bogus’ interpreter made mockery of Barack Obama’s tribute in Soweto
David Cameron explains selfie with Obama and Helle Thorning-Schmidt at Mandela Memorial
French café starts charging extra to rude customers
Krokodil in Mexico? Teenager hospitalised after 'injecting drug into her genitals'
Australia incest case: Severely deformed children found in remote farming community after generations of inbreeding
- 1 Nelson Mandela memorial: ‘Bogus’ interpreter made mockery of Barack Obama’s tribute in Soweto
- 2 John McAfee's $100 'anti-NSA' device: 'this is coming and cannot be stopped'
- 3 French café starts charging extra to rude customers
- 4 Is Facebook making us forget? Study shows that taking pictures ruin memories
- 5 Australia incest case: Severely deformed children found in remote farming community after generations of inbreeding
Negotiable: Randstad Education Preston: Randstad Education are currently recru...
Negotiable: Randstad Education Birmingham: SEN English Teacher required to sta...
Negotiable: Randstad Education Birmingham: Randstad Education has been asked e...
Negotiable: Randstad Education Birmingham: English Teacher needed for a Januar...