Replace Inheritance Tax with ‘lifetime receipts tax’, argues thinktank
With the issue of intergenerational fairness continuing to be high on the agenda, a thinktank has suggested that the Treasury returns to the drawing board when it comes to taxing bequests and inheritances.
Instead of Inheritance Tax (IHT), the Resolution Foundation has floated the idea of a ‘lifetime receipts tax’, which would give individuals a lifetime tax-free allowance, with further thresholds above this amount for lower and higher rates of tax.
It is estimated that such a change could enable the Government to raise an extra £5 billion by 2020-21.
Perhaps the most radical aspect of the proposal is that it would tax beneficiaries, rather than estates. The Resolution Foundation suggests that this would provide an incentive for people to distribute their wealth more widely.
Adam Corlett, the Senior Economic Analyst at the Resolution Foundation who wrote the report, said: “Inheritances are already worth over £100 billion a year, and their doubling over the next 20 years means they are going to play an even larger role in shaping British society.
“But the current system of Inheritance Tax is not fit to deal with this societal shift. It currently manages the uniquely bad twin feat of being both wildly unpopular and raising very little revenue.”
The current system of IHT raises just 77p in every £100 raised through taxation and only applies to the largest four per cent of estates.