A broadly based wealth tax could replace the three capricious ones we have already.
Why is the farming community so upset by the APR and BPR changes?
Most of the reasons given are real, but I think the real reason is that inheritance tax is really hated. It might be different, maybe, if the entry level were way higher and the entry rate were way lower (compare the US where the rates start at 18% on an estate of one £11m rising progressively to a maximum of 40% on the taxable slice over $1m above the threshold).
But it may be the real reason is that people just dislike inheritance taxes. So much so, I understand, that when Sweden discovered its estate tax was the most hated of all its taxes, even by large numbers of people who would never pay it, they abolished it.
Our inheritance tax, with a complete exemption for lifetime gifts made more than seven years before death, does not make any sense. It is in effect a voluntary tax, apart from the family home. But that is the one bit that people really hate seeing go in death taxes (or for that matter in care home fees).
I can see an argument for a sensible wealth tax, but we have at least three now which operate capriciously:
inheritance tax – which operates capriciously (and discourages the sensible use of trusts);
capital gains tax – which does not operate on pensions or main residence which account for 85% of the wealth of 90% of the population and which only operates if you sell stuff, so adversely skewing capital allocation of savings; and
SDLT – which if you have to move house and have a 60% mortgage can be as high as 12% of the gross, so 12/40 = 30% of your net wealth on house equity of maybe £1.2m – which is an outrageous tax on your savings.
Meanwhile the Director General of the National Audit Office said in January that: ‘The losses to the public finances from fraud, error and tax evasion run to billions of pounds a year ... I’d point to Universal Credit, where fraud and error currently costs taxpayers £5.5bn a year.’
Perhaps the time has come for a broadly based wealth tax (based on all wealth, including all dwellings and all pension funds) to replace IHT, personal CGT, and SDLT on dwellings. The tax take from these three is IHT £7bn, CGT £14bn and SDLT £15.4bn, totalling £36.4bn.
Total wealth in UK homes is £8,678bn and in pensions (private sector) is £2,009bn. To raise £40bn per annum, a tax rate of 0.6% would be enough. (This would allow for the first £100k to be tax free.) You could probably charge the super rich a slightly higher rate; they pay more in Switzerland.
State pensions for public sector workers are worth at least £1,700bn, nearly the same as the private sector pensions – so that could be another £10bn per annum! The extra £15bn tax take could have a real effect on NICs, maybe reducing employees’ NICs by a quarter.
Home >Articles > Time for a replacement wealth tax?
Time for a replacement wealth tax?
A broadly based wealth tax could replace the three capricious ones we have already.
Why is the farming community so upset by the APR and BPR changes?
Most of the reasons given are real, but I think the real reason is that inheritance tax is really hated. It might be different, maybe, if the entry level were way higher and the entry rate were way lower (compare the US where the rates start at 18% on an estate of one £11m rising progressively to a maximum of 40% on the taxable slice over $1m above the threshold).
But it may be the real reason is that people just dislike inheritance taxes. So much so, I understand, that when Sweden discovered its estate tax was the most hated of all its taxes, even by large numbers of people who would never pay it, they abolished it.
Our inheritance tax, with a complete exemption for lifetime gifts made more than seven years before death, does not make any sense. It is in effect a voluntary tax, apart from the family home. But that is the one bit that people really hate seeing go in death taxes (or for that matter in care home fees).
I can see an argument for a sensible wealth tax, but we have at least three now which operate capriciously:
inheritance tax – which operates capriciously (and discourages the sensible use of trusts);
capital gains tax – which does not operate on pensions or main residence which account for 85% of the wealth of 90% of the population and which only operates if you sell stuff, so adversely skewing capital allocation of savings; and
SDLT – which if you have to move house and have a 60% mortgage can be as high as 12% of the gross, so 12/40 = 30% of your net wealth on house equity of maybe £1.2m – which is an outrageous tax on your savings.
Meanwhile the Director General of the National Audit Office said in January that: ‘The losses to the public finances from fraud, error and tax evasion run to billions of pounds a year ... I’d point to Universal Credit, where fraud and error currently costs taxpayers £5.5bn a year.’
Perhaps the time has come for a broadly based wealth tax (based on all wealth, including all dwellings and all pension funds) to replace IHT, personal CGT, and SDLT on dwellings. The tax take from these three is IHT £7bn, CGT £14bn and SDLT £15.4bn, totalling £36.4bn.
Total wealth in UK homes is £8,678bn and in pensions (private sector) is £2,009bn. To raise £40bn per annum, a tax rate of 0.6% would be enough. (This would allow for the first £100k to be tax free.) You could probably charge the super rich a slightly higher rate; they pay more in Switzerland.
State pensions for public sector workers are worth at least £1,700bn, nearly the same as the private sector pensions – so that could be another £10bn per annum! The extra £15bn tax take could have a real effect on NICs, maybe reducing employees’ NICs by a quarter.
