Inheritance tax explained by Interactive Investor expert
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Debatewise.org is a website that encourages people to get all perspectives on topics, one of which was the concept of having a 100 percent inheritance tax (IHT) rate, or essentially confiscating inheritance in the UK. The main argument for this concept is that it would succinctly remove the possibility of a person becoming rich from wealth that they didn’t work to earn.
More than 20 percent of the world’s richest inherit their wealth.
Some believe that narrowing the gap between the haves and the have nots could start with having the state confiscate all money being passed on in inheritance.
The proposition would see everyone born in the UK having their inheritance confiscated, or taxed at 100 percent rate.
Debatewise listed some benefits of the peculiar proposition, noting “how can someone hold the right to wealth that they did not create?”.
Wealth distribution is a common debate topic, with people having varying degrees of anger or complacency towards it.
Using a 100 percent IHT rate would stop generations keeping and gaining extravagant amounts of wealth as time goes on.
Debatewise also noted it may increase the incentive for people to earn money rather than expecting it once a family member dies.
In the realms of the one percent this could see more well-educated people going into jobs where all of their skills can be utilised, rather than manning investments or taking over their family business.
However, Debatewise pointed out that not everyone passing on an inheritance is a multimillionaire.
Deliberating the same topic, Forbes reported that it could be possible to keep the current threshold that is exempt to IHT.
This could see smaller inheritances making it through the system with all pennies in tact whilst egregiously wealthy sums are instead given to the state.
Aside from the impact on the people who won’t receive their inheritance, the incredible amount of wealth this tax rate would pay into the system could be greatly beneficial to a state and the people it serves.
This could mean better funded services and schools, cuts in taxes and potentially higher employment in these sectors as they would have the budget for it.
Although, Debatewise highlighted to the potential complications of this saying: “If we lived in a perfect world that’s how things would work. You’d have to be sure that the Government will spend the money well.”
One highlighted point of the proposition is that it would apply to everyone born in the UK, meaning that they would not be able to escape it by immigrating.
This could simplify the process for heirs of people who stayed around the world, leaving inheritance as they went.
Situations like this often leave heirs trying to pick through complicated tax rules in multiple countries, which can at times even impact each other.
The rate would also likely see people saving and investing less especially in later life.
While this would see more money moving in the economy at a time rather than being tied down in investments, properties and assets, the dip in investments and savings could have a domino effect on the wider economy.
Debatewise explained that it may also have a dangerous effect for the people no longer saving or investing: “You might try your hardest to spend all your money while you’re alive, leading to irresponsible or unnecessary spending behaviour to the very limit of one’s resources.”
Worryingly, this could see people who miscalculate how much they should save for the rest of their lives spending retirement in poverty.
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