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).
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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.
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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.
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