Yahoo Finance Tories demand Rishi Sunak scrap ‘morally wrong’ inheritance tax
More than 50 Conservative MPs are demanding that Rishi Sunak scrap the “morally wrong” inheritance tax.
The proportion of homes under threat from the levy has more than doubled since the Conservatives came to power, despite George Osborne, the former Chancellor, pledging to abandon the death tax for all but the most wealthy in the run up to the 2010 election.
Instead, the threshold has been frozen since 2010 and almost 40pc of homes sold in England and Wales last year were worth more than the basic allowance.
The levy is regarded as profoundly unfair as it penalises people who have saved money throughout their lives after paying tax on their income – and is punishing middle class families who want to help children or grandchildren to own homes.
The Telegraph is launching a campaign to scrap inheritance tax – a move which should be put at the heart of the Conservatives’ next election manifesto amid growing fears that Labour is plotting to target savings and assets to fund even higher levels of state spending.
This newspaper is receiving a growing number of letters from readers facing intrusive probate investigations into their estates at one of the most difficult moments in their lives. Many other countries are removing similar levies.
Writing in this newspaper, former chancellor Nadhim Zahawi describes the death duty as “morally wrong” and warns that it is adding inflationary pressure to house prices.
Mr Zahawi writes: “Inheritance tax is that other spectre that haunts us alongside death. As well as being morally wrong to take someone’s assets on their death, it also creates all sorts of inefficient and damaging distortions in our personal finances, and the wider economy.”
Former business secretary Jacob Rees Mogg said inheritance tax raised only a “modest amount” for the Treasury and should be scrapped. The taxman collected £7.1bn in inheritance tax last year.
He said: “Death duties are an inefficient form of taxation that is unfair and economically damaging. Unfair because it is a double tax on already taxed assets.
“Economically damaging because it leads to the misallocation of capital as investments are made to avoid a distortive tax rather than to maximise investment return.”
The tax remains deeply unpopular, with around half of the public judging it to be unfair or very unfair according to a recent poll by YouGov.
Former home secretary Priti Patel described the inheritance tax system as both “regressive and punitive”.
She said: “People should be in control of their income and have the ability to determine the future of the assets they have worked hard to save and build up during their lifetime.
“Substantial long term reform is required and I would encourage proactive steps to support hard pressed families across our country.”
The campaign comes more than 15 years after the then shadow chancellor Mr Osborne pledged to raise the inheritance tax threshold to £1m – ensuring that only millionaires would pay the levy under the Tories.
The move was so popular that it was widely credited with deterring Gordon Brown from calling a snap election.
However, the inheritance tax threshold has remained at £325,000 since 2010 and Chancellor Jeremy Hunt has now frozen it until 2028.
The Conservative Growth Group of 55 MPs will launch a campaign in June to convince the Treasury to abolish inheritance tax in the Autumn Statement later this year. An election is expected in 2024.
The group, led by allies of former PM Liz Truss, will publish a paper justifying why parents should have the freedom to pass their wealth to their children without sacrificing a chunk to the state.
The Tories behind the campaign believe such a move could provide a much needed boost for the Conservatives, who are lagging behind Labour by double digits in the polls and haemorrhaged more than 1,000 seats in May’s local elections.
Ranil Jayawardena, a former member of Mrs Truss’s Cabinet and chairman of the Conservative Growth Group, told the Telegraph: “We need to be bold and abolish inheritance tax altogether – no ifs, not buts.
“It’s a death tax. It’s also a double tax, because it’s a tax on money that has already been taxed. It’s not fair, it’s not Conservative and it’s not very British. It needs to go.”
Inheritance tax is charged at 40pc on wealth over the £325,000 threshold. Individuals have an extra £175,000 allowance towards their main residence if it is passed to children or grandchildren, and spouses can share their allowances.
However, rising house prices over the past decade have dragged an increasing number of ordinary families into paying the tax and forced many more to take action to avoid falling into the trap.
Analysis for the Telegraph today reveals that the number of families forced to pay the tax will surge by 45pc over the next decade with 60,000 hit in 2033 and the average bill topping £300,000.
Growing numbers of grieving families must also face the burden of filling out paperwork and consulting financial advisers to ensure they claim their allowances and do not pay more than they need to.
Homeowners in the South East have been hit particularly hard, where almost two-thirds of properties sold last year exceeded the minimum threshold, Hamptons found.
A series of stealth tax rises have pushed the national tax burden to a record £786.6bn and it is on course to hit the highest level since the Second World War.
Yet Rishi Sunak has so far put off reducing Britain’s tax burden, stressing that his priority is to get inflation down as prices have soared in the wake of the Covid crisis and war in Ukraine.
A Treasury spokesman said: “More than 93pc of estates aren’t expected to pay any inheritance tax in the coming years – however the tax still raises more than £7 billion a year to help fund public services like the NHS and schools.
“Estates of surviving spouses and civil partners can pass on up to £1 million without an inheritance tax liability – significantly more than the average UK home of £285,000.”
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