We Need To Reform Inheritance Tax Now If Rising Inequality Is To Be Tackled

18th August 2024

Richard Murphy writes in his blog about the need to reform Inheritance Tx and that so far the Labour Government has said nothing.

In response to a Financial Times article on the "Great Wealth Transfer" that will happen in the next decade as Boomers start to die in larger numbers, I argue that the current inheritance tax system reinforces inequality.

Generous tax reliefs for pensions, agricultural, and business properties should end, and wealth transfers should be taxed more heavily.

The rising wealth transfer presents a crucial opportunity to meet younger generations' needs, and redistribution through taxation is essential. Radical reform is necessary to address this growing issue.

The FT had an article yesterday in which it referred to what it called the great wealth transfer. As it noted:

Over the next 20 years, as baby boomers pass on assets to younger generations, we will see the largest wealth transfer in history. In the UK, £1tn is expected to change hands in the 2020s alone.

But for families, transferring wealth between generations is often a tricky task. There are many hurdles to negotiate, including tax and estate planning, while younger people receiving large amounts of money will need to make decisions about investing and saving that they have never had to make before.

The context in which it was discussing this enormous, upcoming transfer of wealth between generations was apparent from that second paragraph. What it wants to know from its wealthy readers is how they propose to plan this transfer of wealth and what steps, amongst other things, they are taking to mitigate their tax liabilities that might arise as a consequence.

I am well aware that there is a substantial business activity undertaken in the UK advising on how to mitigate inheritance tax liabilities. My own pension advisor, who knows my opinion on these things, still thinks it necessary to point out to my wife and me that we should plan our wills with care to ensure that those liabilities are mitigated. I suspect that we are not the most receptive audience.

That said, the fact that so much wealth is now changing hands is something that should be considered by a responsible government, and so far, we have heard nothing at all from Labour on this issue.

Read the full blog item HERE