Yahoo Finance ‘My dad worked hard all his life – he would have been heartbroken by what the taxman took’
Bernard Hayes was born in 1917 to a modest family in Birmingham, and when he began delivering morning papers before his primary school classes, it marked the start of a working life that would span decades.
“My dad worked his socks off from a young age,” said his son, Denis Hayes. “He eventually trained as a carpenter, and that was his trade until the war broke out. Then he joined the Royal Electrical and Mechanical Engineers.
“He was seriously wounded in the war but he came back and started working, trying to help pick up the pieces. He started saving, investing and eventually became a salesman. He bought his own home, but lost it and had to pick up the pieces again. That was how he lived: he worked, he persevered, he lived modestly and saved.”
But after Mr Hayes passed away on his 99th birthday in 2016, the taxman came knocking and hit his family with a bill of around £200,000.
“Taking everything into account, we received just under £500,000,” his son said. “My dad would have been heartbroken at this. He was an upright man who paid his taxes, never sought benefits and was completely independent. Despite all those long, long years of working, suddenly all that money is gone. For us, it is not even really about the numbers, it is the injustice of it.”
More and more ordinary, hard-working families such as the Hayes are being forced to hand over chunks of their life savings to the state rather than to their loved ones.
It is why the Telegraph is today calling on the Government to abolish the tax.
And as a general election looms, more than 50 Tory MPs are also demanding an end to Britain’s unpopular death duty which is having an increasing impact as inflation soars.
Inheritance tax hit more than 41,000 grieving families last year, with a freeze in the tax-free allowance combined with a property price boom over the past decade leading to the burden soaring over the past two decades.
Experts think the numbers stung by the levy could soar again by 45pc within just a decade, meaning around 60,000 estates could face the 40pc tax by 2033, according to estimates from the Institute of Economic Affairs think tank.
The taxman raked in £2.4bn in inheritance tax receipts in the 2009/10 tax year – since then it has more than doubled to £7.1bn.
For lifelong Conservative voter Lauren Groom, a 76-year-old from Wiltshire, the Government’s failure to address inheritance tax means she would rather abstain from voting at the next election.
She said: “Even an ordinary person like me will see their kids clobbered by this tax when they die, yet the housing they currently live in is below the standard I enjoyed at a similar age.
“By the time some possible easement is on the horizon, the heirs of parents with assets of more than £325,000 will face the virtual confiscation of 20 years’ asset growth. Jolly nice for the Government, jolly unfair on those who have worked to make sure their children have a good start in life.”
Laurence Cohen, a 76-year-old accountant from Hertsmere, told the Telegraph that for him, inheritance tax has become a serious worry, even after building a six-figure portfolio in London’s junior stock market, where most shares held for more than two-years come free of inheritance tax.
“Years ago, it seemed way off into the horizon but inheritance tax has crept up on me,” he said. “The idea of modernising or simplifying it is very appealing, but the Conservatives don’t seem to be listening.”
Everyone gets a “nil rate band” of £325,000, which has been frozen since 2009. Individuals also have an extra £175,000 allowance towards their main residence if it is passed to children or grandchildren, and spouses can share their allowances.
Once your money surpasses these limits, the Government can tax you at a rate of 40pc – much higher than elsewhere in Europe, where inheritance tax often does not exist at all, and certainly no match for the US, where an “estate tax” only applies to portfolios worth more than $12.9m (£10.3m).
In Britain, a property boom over the past decade has dragged a rising number of ordinary families into paying the death duty – with the average bill standing at £215,652 in the 2019/20 tax year. This is projected to top £300,000 by 2033, according to estimates from the wealth manager Quilter.
Meanwhile the data show that the tax, which is affecting a growing number of middle class families, does not apply to the super rich.
Analysis published by the Office for Tax Simplification showed that the effective tax rate paid by families shot up when the estate value hit £1m, but dropped sharply when it reached £9m, as multi-millionaires enjoyed the liquidity and resources to take advantage of a long list of loopholes and exemptions that most regular families do not.
It is little wonder then that inheritance tax is so unpopular – around half of the public believe it is unfair or very unfair, according to a recent poll by YouGov. Meanwhile, it puts an onerous administrative burden on grieving families, says Richard Harwood, of the wealth manager Brewin.
“Gathering all the paperwork is your first problem,” he said. “When a member of the family passes away and they do not have their affairs in order, it can take months to sort out. You have to find out their overall financial position – their investments, their savings, an old building society account or share certificates. All of it has to be tracked down.
“Then if they have taken measures to lower the inheritance tax bill, you have to prove this to HMRC.”
Mr Harwood noted that often the taxman demanded inheritance tax payments before money is released from the estate.
“This means you have to foot the bill by yourself,” he said. “Some people have to take out a loan just to meet this payment.”
A Conservative government could rid the middle classes of this growing injustice in one stroke – and with relatively little impact in terms of public finances, experts have suggested. Inheritance tax made the Treasury £7.1bn in the last tax year, just a fraction of its overall receipts of £786.6bn.
Meanwhile, Labour, who have a double digit lead in the polls, is understood to be plotting to raise the tax even further. It means the wealth of hundreds of thousands of families could be at stake when Britain next goes to the ballot box.
Reform of the tax has proved hugely welcome in the past: George Osborne promised as shadow Chancellor in 2007 to increase the inheritance tax threshold to £1m, in a move so popular that it was widely credited with deterring Gordon Brown from calling a snap election.
In the meantime, failure to act continues to increase the potential tax liability faced by tens of thousands of families. On average, homeowners’ possible inheritance tax bills have grown to £157,000 in London, according to research from the broker Interactive Investor, and £106,000 in the rest of the South East. Welsh homeowners had the highest average inheritance tax liability outside of England, at £33,358.
Myron Jobson, of the broker, said that if the minimum threshold had risen in line with inflation, it would have hit £484,000. “In other words, the deep freeze in the IHT thresholds has cost families £159,000 since 2009,” he said.
It does not help the Government’s adamant commitment to inheritance tax that Britain is one of the few countries in the Western world with such a death levy – there is no such tax in Australia, Canada or New Zealand, and where it exists in Europe, it is usually at a much lower rate.
In the US, no one is expected to pay any tax on their estate until it hits almost $13m, which means that a married couple can shield almost $26m. Plus, anyone can give tax-free gifts of up to $17,000 to an unlimited number of people, and it does not count against the larger estate tax exclusion.
Meanwhile in Britain, a broken system means that parents must face the reality of decades of hard work being swallowed by the taxman upon their death – and that their children may not be able to inherit their family home without first paying a bill worth hundreds of thousands of pounds.
Do you have a story for our campaign to abolish inheritance tax? Email money@telegraph.co.uk
