It's impressive for a politician to engage this seriously with policy, so thanks.
But it's a horrible policy idea, which adds another carve out to the tottering pile of carve outs that is British policymaking these days. It must be political goggles that make one see protecting the tax free capital gains on houses from the taxman, in perpetuity and at all costs, as being among the country's priorities.
No doubt the politics works as the vast majority of Brits whose estates won't fall under IHT have been convinced otherwise. No doubt this will turn some heads in Lib Dem or Lib Dem-curious constituencies in the south east. But still.
Look forward to seeing Dan Neidle's response, and hopefully Oxford Economics can demonstrate as much transparency about their calculations as he does.
Well argued thanks Neil. But I don’t understand this constant depiction of “hard working” property owners. The gain has not come about through any hard work at all. I worked hard and paid a lot of tax as a result. But my house? I just sat there and watched the value rise. Why should that unearned gain not be taxed, either on my sale as CGT (though it would be nice to have an inflation adjustment) or on my death so that my kids don’t get a huge unearned untaxed benefit while their less fortunate peers with less wealthy parents struggle to ever afford to buy a house. In the 21st century the biggest predictor of future wealth is not intelligence, drive, courage or hard work. It’s having rich parents. Just like every century before that except the twentieth. And the Conservative proposals are just helping perpetuate that.
I agree with you, it’s a bad tax. But to govern is to choose, and my issue is that you have chosen to prioritise very limited fiscal room on this instead of 10 other economically better or morally defensible tax reductions.
Person A buys a house for 250k which then appreciates to 1m, they pay no CGT as a primary residence, and now no IHT. This wealth (not value) creation apparently must be protected at all costs.
Person B has the misfortune to not have wealthy parents, but now does well enough to earn over 100k, and pays an effective 62% in tax. Despite generating actual economic value, this sucker is ripe for the taking, even before he sees it in their bank account.
It’s hard not to believe you are protecting those who have accrued large amounts of unearned capital at the expense of those who actually work to earn it.
How do you expect people to become capitalists if it’s incredibly difficult to accrue capital because this country punishes producers at the expense of the welfare class and middle class rent seekers? I should be a natural Tory voter, but I’m not, and this sort of thing is why.
I can't really work with the vague idea that you might aim to remove IHT one day, and this is just the first stage in the Conservative's grand plan. These proposed changes would make a fair bit of difference to my current IHT projection, but I would still be left in the position where it would be irrational not to set up a trust anyway.
The later bit of your analysis on people paying a whack of tax if they want to upsize to benefit from these changes doesn't seem to show much awareness of how many ISA millionaires there are these days. People who think they have not long left to live would know that they can swerve a big lump by converting all their ISA investments (fully exposed to IHT) into a bigger primary residence. Sure some in that position might have already taken other measures with their tax planning, but some won't.
Another weird outcome you might see could be wealthy people installing things of insane value in their properties, which can be removed/resold after the estate is unwound. Diamond studded gold toilets etc.
Any moderately complex estate above the nil rate threshold can take months, if not years to get probate and yet IHT is due within six months of death. This can cause problems for executors particularly if there are illiquid assets such as property (especially with an outstanding mortgage) and shares in private companies, which only qualify for 50% BPR now. The executor cannot sell assets until probate is received. IHT is a pernicious tax and it should go entirely. I like Kemi but what she is proposing isn’t even a halfway house.
Fully agree on your assessments re. stamp duty and will be an economically dynamic direction if you commit to that.
However, I don't think the 'double taxation' argument works when 30-50% of inheritance value in the UK is untaxed capital gains on property. It's right to not tax the primary residence in someone's lifetime, but I fail to see why hundreds of thousands of above inflation property rise is evil to tax?
I say this has someone who would benefit from this but would prefer tax cuts to be on my marginal income. And your plan to allow unlimited primary residence will only make this worse, disencouraging appropriate downsizing and worsen housing affordability for young people.
I was excited by your plans to alter housing regulations, but this is just another ill-thought grab at elderly shires voters.
It's impressive for a politician to engage this seriously with policy, so thanks.
But it's a horrible policy idea, which adds another carve out to the tottering pile of carve outs that is British policymaking these days. It must be political goggles that make one see protecting the tax free capital gains on houses from the taxman, in perpetuity and at all costs, as being among the country's priorities.
No doubt the politics works as the vast majority of Brits whose estates won't fall under IHT have been convinced otherwise. No doubt this will turn some heads in Lib Dem or Lib Dem-curious constituencies in the south east. But still.
Look forward to seeing Dan Neidle's response, and hopefully Oxford Economics can demonstrate as much transparency about their calculations as he does.
Well argued thanks Neil. But I don’t understand this constant depiction of “hard working” property owners. The gain has not come about through any hard work at all. I worked hard and paid a lot of tax as a result. But my house? I just sat there and watched the value rise. Why should that unearned gain not be taxed, either on my sale as CGT (though it would be nice to have an inflation adjustment) or on my death so that my kids don’t get a huge unearned untaxed benefit while their less fortunate peers with less wealthy parents struggle to ever afford to buy a house. In the 21st century the biggest predictor of future wealth is not intelligence, drive, courage or hard work. It’s having rich parents. Just like every century before that except the twentieth. And the Conservative proposals are just helping perpetuate that.
Neil,
I agree with you, it’s a bad tax. But to govern is to choose, and my issue is that you have chosen to prioritise very limited fiscal room on this instead of 10 other economically better or morally defensible tax reductions.
Person A buys a house for 250k which then appreciates to 1m, they pay no CGT as a primary residence, and now no IHT. This wealth (not value) creation apparently must be protected at all costs.
Person B has the misfortune to not have wealthy parents, but now does well enough to earn over 100k, and pays an effective 62% in tax. Despite generating actual economic value, this sucker is ripe for the taking, even before he sees it in their bank account.
It’s hard not to believe you are protecting those who have accrued large amounts of unearned capital at the expense of those who actually work to earn it.
How do you expect people to become capitalists if it’s incredibly difficult to accrue capital because this country punishes producers at the expense of the welfare class and middle class rent seekers? I should be a natural Tory voter, but I’m not, and this sort of thing is why.
I can't really work with the vague idea that you might aim to remove IHT one day, and this is just the first stage in the Conservative's grand plan. These proposed changes would make a fair bit of difference to my current IHT projection, but I would still be left in the position where it would be irrational not to set up a trust anyway.
The later bit of your analysis on people paying a whack of tax if they want to upsize to benefit from these changes doesn't seem to show much awareness of how many ISA millionaires there are these days. People who think they have not long left to live would know that they can swerve a big lump by converting all their ISA investments (fully exposed to IHT) into a bigger primary residence. Sure some in that position might have already taken other measures with their tax planning, but some won't.
Another weird outcome you might see could be wealthy people installing things of insane value in their properties, which can be removed/resold after the estate is unwound. Diamond studded gold toilets etc.
Any moderately complex estate above the nil rate threshold can take months, if not years to get probate and yet IHT is due within six months of death. This can cause problems for executors particularly if there are illiquid assets such as property (especially with an outstanding mortgage) and shares in private companies, which only qualify for 50% BPR now. The executor cannot sell assets until probate is received. IHT is a pernicious tax and it should go entirely. I like Kemi but what she is proposing isn’t even a halfway house.
Trusts do pay inheritance tax. Please talk to an expert and rewrite your piece.
Fully agree on your assessments re. stamp duty and will be an economically dynamic direction if you commit to that.
However, I don't think the 'double taxation' argument works when 30-50% of inheritance value in the UK is untaxed capital gains on property. It's right to not tax the primary residence in someone's lifetime, but I fail to see why hundreds of thousands of above inflation property rise is evil to tax?
I say this has someone who would benefit from this but would prefer tax cuts to be on my marginal income. And your plan to allow unlimited primary residence will only make this worse, disencouraging appropriate downsizing and worsen housing affordability for young people.
I was excited by your plans to alter housing regulations, but this is just another ill-thought grab at elderly shires voters.