Inheritance Tax Faces Scrutiny: Cabinet Minister Criticizes it as ‘Punitive and Unfair’
The debate over inheritance tax has taken center stage as a Cabinet minister labels it as ‘punitive and unfair.’ The tax, currently set at 40 percent, is imposed on estates worth more than £1 million for couples. This issue of inheritance tax, according to Mr. Shapps, the Defense Secretary, is a matter of aspiration for many people.
Referred to by some as the most hated tax in Britain, the inheritance tax has faced criticism due to its significant burden on individuals. However, despite reports that Rishi Sunak, the Prime Minister, is considering a cut to the levy, both Downing Street and the Treasury caution against expecting an immediate announcement.
Officials are cautious, pointing out that Jeremy Hunt, the Chancellor, recently stated that there is no room for tax cuts in the upcoming Autumn Statement in November. Nonetheless, there is a possibility of a two-stage abolition of the levy, with a potential reduction in the March Budget, before the Tories head into an election with plans to completely scrap it.
In light of this debate, Mr. Shapps asserts that there is an inherent unfairness in being taxed throughout one’s life and even in death. Drawing on his personal experience, having recently lost his father, he understands why people may view inheritance tax as particularly punitive.
He further acknowledges the fiscal restraints faced by the government, with the Chancellor noting last week that tax cuts are not currently feasible. Inheritance tax is currently set at 40 percent on estates exceeding £325,000, with an additional £175,000 allowance for the main residence if passed on to children or grandchildren. Married couples can share their allowance, allowing most parents to pass on £1 million without incurring any tax.
While political advisers have been exploring the possibility of abolishing inheritance tax in the future manifesto, it is not something that can currently be afforded, states a government source. Another source emphasizes the challenging fiscal situation, and deems it premature to speculate on tax cuts.
Meanwhile, Downing Street is strongly considering retaining the pension triple lock policy for the next election, despite its potentially substantial cost. This policy ensures pensions rise in line with inflation, earnings, or a minimum of 2.5 percent. Private polling has indicated negative reactions from voters towards scrapping the policy, thus ruling out any changes.
Funding social care for the elderly, however, is not being addressed at present due to the concerns of repeating the ‘dementia tax’ controversy that marred Theresa May’s 2017 election campaign.
As of now, the commitment to the triple lock policy remains, with the Secretary of State for Work and Pensions, Mel Stride, set to conduct his annual review of benefits and state pensions later this year. The government spokesman declines to comment on speculation regarding future manifesto commitments.
The proposed changes to inheritance tax and the retention of the pension triple lock have sparked a contentious debate regarding tax policies in the UK. While many argue that inheritance tax is harsh and unfair, the government faces fiscal constraints that make tax cuts challenging. The political landscape will undoubtedly evolve in the coming months, with implications for the future of inheritance tax and pension policies.
