Kate Andrews Kate Andrews

Inheritance tax has become yet another stealth tax

Credit: Getty images

Most people will not see their estates subject to inheritance tax. Still, most people oppose the principle of the tax altogether. New polling from Ipsos confirms, once again, how loathed the death tax is: 23 per cent of people perceive the tax as ‘fair’ (tied for the lowest ranking, alongside stamp duty). Meanwhile 43 per cent of people see the tax as ‘unfair’ (the highest ranking, even more hated than income tax paid by the lowest earners).

It won’t go down well, then, that almost 50,000 additional households are expected to be dragged in to paying inheritance tax, nearly four times the expected increase according to HMRC forecasts seen by the Daily Telegraph. This increase is expected to take the number of households affected by the tax to more than 280,000 by the end of 2027-28.

Freezing these thresholds has been the government’s preferred method for getting more taxpayer income into the Treasury

Of course there is the issue of stated versus revealed preference when it comes to this tax. Just a few weeks ago, Ross Clark made the case for prioritising income tax cuts over inheritance tax. He noted that the UK’s horribly distorted housing market is allowing children to inherit million pound households without being taxed a penny, while those whose parents may not have climbed onto on housing ladder cannot imagine how they might ever be able to afford a home, as the taxman keeps taking their disposable income away. 

It seems the public may be sympathetic to this assessment. While they rank inheritance tax to be ‘most unfair’, only 14 per cent said they would ‘most prefer’ to see this levy cut. Instead, 44 per cent opted for an income tax cut for workers earning below £50,000, followed by 34 per cent for council tax, 26 per cent for VAT, 20 per cent for fuel duty, and 19 per cent for National Insurance.

So, while the ethics of the death tax don’t sit right with people, there is perhaps some broader recognition that the tax cuts most likely to affect them personally are not those related to passing down wealth through the generations.

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