How to solve the problems with Britain's property market
Merryn Somerset Webb believes she may have might have a partial solution to the many problems of Britain's dysfunctional property market. It involves inheritance tax.
A word on the UK property market. I have, like all other commentators, been thinking again about a possible solution to its various problems (beyond the obvious one of raising interest rates to crash prices). And I think I might have a partial solution. It involves inheritance tax (IHT).
David Cameron introduced an add-on to the tax regime called the main residence nil-rate band, which by 2020 will allow a couple an extra £350,000 tax-free allowance to use to pass on a family home. This is a bit silly. It perpetuates and legitimises the deeply destructive idea that homes are the be all and end all and it discriminates against those who don't own them.
How about if we reverse it and then drop IHT on all assets apart from residential property? So all investments in everything else equities, bonds, family firms, gold bullion and so on pass on tax free. But all houses are taxed on death at, say, 20% of their market value or perhaps even just on their capital gains (no allowances).
That should encourage the retired to downsize possibly even freeing up the cash to pay for their own social care along the way. And it might even mark a turning point in the way we view houses, from a must-hoard item to an end-of-life hot potato. Problem solved. Comments welcome.