John O’Connell is Chief Executive of the Taxpayers’ Alliance
The cost of dying is going up. The TPA published work yesterday detailing the taxes and charges involved when someone passes away. Inheritance Tax (IHT) is the obvious money spinner – in 2019-20, the government is projected to receive £5.35 billion from grieving taxpayers, the highest amount ever.
Inheritance Tax (IHT) is unpopular. Some polls put it ahead of other taxes as distinctly unloved – it’s often followed by Council Tax and the Licence Fee. That won’t come as a surprise to many ConHome readers, but it possibly is surprising to left-wing campaigners – who believe that inheritances entrench inequality, and that we must punish an imagined ruling aristocratic class.
Simply, IHT goes against a natural human instinct to make sure your family is looked after when you’re gone. To that end, it’s anti-aspirational – why work so hard to look after your children if the taxman guzzles it all up anyway?
But this is only one of the many ways that the government extracts money from the dead. These charges also include the cost of death certificates, land registry fees, probate and VAT.
All of that means a homeowner living in London, without a spouse or children to pass assets on to, who purchases a coffin and is cremated, faces a cost of death of up to £60,773.
This could rise to £61,308 if the newly proposed probate fees come into force. Under the innocuous sounding ‘Non-contentious Probate (Fees Order)’, Philip Hammond’s Treasury looked set to push ahead with a plan to hike the fees charged for a grant of probate from the current flat rate of £215 (£155 if a solicitor is used) to a sliding scale of fees ranging from £250 to £6,000, based on the value of the estate.
That ignores the fact that the probate service is not optional for many households. Receiving an inheritance is often unexpected and so families may not have had an opportunity to plan. This will often be the case for households on lower incomes, who do not have the resources to consult expensive solicitors. They are the people who will be most unfairly impacted.
Perhaps the cost of dying all seems rather small fry, in relation to delivering Brexit by October 31. But there is likely to be a Budget ahead of the deadline, which will need to encourage investment and win back support for the Conservative Party potentially embarking on a No Deal and General Election. So there could be three interesting elements to consider:
1. Help everyday families.
Philip Hammond’s proposal to whack up probate fees on families that may not have expected an inheritance, and may be cash poor. It is also a disproportionate increase. The level of service involved in a grant of probate is roughly equivalent, regardless of the size of the estate. Therefore, increasing the fees all the way up to £6,000 is extremely difficult to justify. As Guido reported at the time, the Lib Dems had issues with the move, as do the Law Society. It should be immediately junked.
2. Win back support with tax cuts.
The Government should consider increasing the thresholds at which people pay IHT. Consider how this issue was weaponised by George Osborne in 2007 – he dared Gordon Brown to hold an election with a promise to raise the thresholds to £1million. Brown blinked. Popular tax cuts alongside a Brexit-friendly Budget might just help a party aiming to bring voters back onside.
3. Encourage investment.
Simpler taxes are better and in the long-run, IHT should be abolished. But for now, investment is crucial. Leftist groups such as the Resolution Foundation and the Tax Justice Network have been critical of IHT reliefs like Business Property Relief (BPR). In doing so, they argue that reliefs “cost” the Treasury money; that “the government is handing out” money. Such talk is nonsense – it assumes all money belongs to the government and they simply decide to give some of it back. But until we simplify IHT by abolishing it entirely, reliefs like BPR and the Enterprise Investment Scheme can help drive growth and encourage responsible saving. BPR has been a vital tool in helping smaller companies across the UK, via the Alternative Investment Market (AIM), and has a role in ensuring that companies aren’t broken up to meet IHT liabilities, as the government alludes to. So MPs and mandarins must ignore calls from leftwing Twitter hordes and ensure that investment continues apace after the 31st October.
The new government has come flying out of the blocks and looks set to deliver Brexit by October 31st. The cost of dying may not be top of the list of priorities, but a Budget could be upon us before we know it – now’s the time for good ideas and fighting off bad ones.