Abolish inheritance tax - and make death a taxable event

Inheritance tax is unpopular with many readers - so here's a novel solution to getting rid of it altogether.

I have written several pieces on inheritance tax (IHT) recently. You can read them here and here. The key point I am trying to make in bringing the subject up (over and over again) is that there is no need for a separate IHT.

Why? Because from the point of view of an heir, an inheritance is simply a lump of unearned income. So, why not just tax it as such - at the recipient's marginal income tax rate. That way we would get rid of all sorts of loopholes (and the lifestyle misery they cause), make our system more equal, and best of all, take a huge step towards the simplification of our tax system.

Not everyone likes the idea, of course a good many readers just think that no one should ever have to pay any tax of any kind on an inheritance. I can't agree with that (read the articles again for my reasons).

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But there has been one suggestion that has popped up a few times that I could accept as a possible alternative to my own ideas. Instead of abolishing IHT and making an inheritance subject to income tax, why not make death a taxable event for capital gains tax (CGT)purposes?

IHT and all its complications are still abolished, but capital gains tax is payable on all assets on death. This is roughly how it works in Canada, although there as I understand it, the principle residence still passes on tax-free.

Regular readers will know that I'd like to abolish stamp duty and put a CGT on primary homes as a way to make property taxation a tad more rational (see many earlier blogs on this).

If the endgame here is tax simplification (and why wouldn't it be?), wouldn't it be nice if we could abolish IHT and stamp duty at the same time and replace both with an extension of the CGT regime?

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.