A report from political think tank Demos has revealed that the British public’s view on taxing inheritance is not as clear cut as assumed.
Its survey of more than 2,000 people across the UK found that while there is some opposition to taxing inheritances, there is also support for this, in specific cases.
Demos said that, while the £100bn ($126bn, €117bn) passed on in inheritances and gifts in the UK each year is set to double in England by 2040, this is not widely taxed because policymakers are hesitant to reform inheritance tax due to perceived public opinion.
Yet, the survey revealed that 75% of respondents believe some inheritances should be taxed, with just over a fifth (21%) stating that all inheritances should be tax free, regardless of the amount involved.
Respondents said that inheritance should be taxed in some cases, for instance, if given by people who did not acquire their wealth through work, or if given to people who have a high income, wealth or a previous inheritance.
Demos said: “The current perception that the majority of people have an absolutist aversion to inheritance in all cases means policymakers are cautious about discussing these issues or committing time to reform.
“Our survey shows that people take this absolutist stance when discussing inheritance in a general sense, but that very few people take this stance when thinking about specific inheritances.”
‘Act of love’
Alice Guy, head of pensions and savings at interactive investor, added: “Inheritance tax by definition is usually paid by older people, so it’s the attitudes of this generation that are the most relevant. They will be the most affected by frozen inheritance tax thresholds at a time of high inflation.
“The great wealth transfer of the ‘baby boomer’ generation is only just beginning and politicians will want to tread very carefully before they stir the hornet’s nest, as feelings run high on passing on wealth to your family.
“Passing on wealth is a source of pride and often a final act of love to provide and help out younger generations. Our tax system is a careful balance between taxes on income and wealth. Swing too far in one direction and policy makers risk unfairly penalising those who have never felt wealthy and simply want to do the best for their family.”
This follows a Daily Telegraph report which said around 50 Conservative MPs have demanded that UK prime minister Rishi Sunak should scrap IHT, which they describe as “morally wrong.”
Receipts from IHT have been reaching eye-watering levels. HM Revenue & Customs (HMRC) recently released data which found that IHT receipts in April 2023 had hit £600m, up by £100m compared to the previous year. The IHT haul for 2022/23 had rocketed by £1bn in the last year to £7.1bn ($8.9bn, €8bn).
