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.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

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).

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?

Advertisement
Advertisement - Article continues below

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?

Advertisement

Recommended

Visit/519223/how-can-we-raise-more-money-in-tax
Economy

What are the best ways of raising more money in tax?

Given that whoever wins next week's election will be going on a massive spending spree, we're going to need to raise at least some of that money throu…
5 Dec 2019
Visit/518715/what-are-the-biggest-mistakes-investors-make-when-it-comes-to-tax
Investment strategy

What are the biggest mistakes investors make when it comes to tax?

The tax implications of an investment are something we rarely consider until after the event. That could prove to be an expensive mistake, says Domini…
27 Nov 2019
Visit/516603/how-tax-has-shaped-the-course-of-human-history
Economy

How tax has shaped the course of human history

Taxation is as old as civilisation itself. But how much is too much? Dominic Frisby looks at how taxation, war and society have evolved together over …
16 Oct 2019
Visit/520306/self-assessment-dont-miss-the-deadline-for-online-tax-returns
Personal finance

Self-assessment: don’t miss the deadline for online tax returns

If you are self-employed, rent out a property or earn income from savings, investments and dividends, you need to fill in a tax return. And the deadli…
13 Jan 2020

Most Popular

Visit/520525/currency-corner-how-high-can-the-pound-go-against-the-euro-in-2020
Currencies

Currency Corner: how high can the pound go against the euro in 2020?

In the month in which we should finally leave the European Union, Dominic Frisby takes a look at the pound vs the euro and asks just how high sterling…
13 Jan 2020
Visit/investments/property/house-prices/600638/uk-house-prices-may-be-heading-for-a-boris-bounce
House prices

UK house prices may be heading for a Boris bounce

The latest survey of estate agents and surveyors from the Royal Institution of Chartered Surveyors is "unambiguously positive" – suggesting house pric…
16 Jan 2020
Visit/economy/600632/money-minute-friday-17-january-uk-weakness-likely-to-continue
Economy

Money Minute Friday 17 January: UK weakness likely to continue

Today's Money Minute previews UK retail sales figures the UK, inflation data from Europe and industrial production from the US.
17 Jan 2020
Visit/520598/money-minute-thursday-16-january-a-batch-of-company-results
Economy

Money Minute Thursday 16 January: a batch of company results

Today's Money Minute looks ahead to results from a host of UK companies, plus the latest unemployment figures from the US.
15 Jan 2020