It’s quite typical to begin a financial article with the worn-out quotation attributed to Benjamin Franklin that nothing in life is certain apart from death and taxes. However, as well as being a little trite and over used, the sentiment is actually incorrect, in spite of continued use by financial panjandrums. Leaving the metaphysical debate to one side, many taxes are entirely voluntary, albeit with some planning required on the part of the individual to negate them, and there is probably no greater example of this than inheritance tax (IHT).
While many accept that the taxation requirements for income and capital gains are in principle correct, views on IHT are far more divided. The argument against it generally follows a well-trodden route: as tax has already been paid once upon earnings and gains, the levy of death duties is iniquitous, particularly when adding in all of the other taxes suffered during a lifetime and the raw emotion involved with dealing with a loved one’s estate.
Others have presented a counter argument supporting IHT. It redistributes wealth and raises taxes for the Exchequer. Some prefer that the nation receive their wealth rather than their heirs! One thing is certain. Since the origins of the estate duty, individuals seeking to reduce the effects of IHT have taken action to reduce or completely eradicate the levy on their estates. Indeed, one only needs to look in an obituaries column to see how much of a taxable estate the deceased has left, with the implication that they had either been a pauper or – more likely – successful in shielding their assets from IHT. Read the full article >