Inheritance Tax, the great debate...

None of us like Inheritance Tax, even me who has carved a career out of helping people manage their exposure to it. It is one of the most unjust taxes on the statute book, which is one of the main reasons I have never had too much of a moral dilemma when it comes to helping people arrange their affairs so that they pay only as much as they need to. It was Roy Jenkins who famously said “Inheritance Tax, is broadly speaking a voluntary levy paid by those who distrust their Heirs more than they dislike the Inland Revenue.”

So, enter the news today our incumbent Prime Minister at a Q&A session with Age UK states that only the very wealthy should pay Inheritance Tax. A noble statement, but how does one define "the very wealthy", after all we have seen child benefit removed from households with one person earning over £50,000, but households with two people earning £49,999 each get to keep it. The prime minister said he would like to ease pressure on people who do not regard themselves as “in any way the mega-rich” but whose estates are subject to the tax. Again, a very nice political soundbite, but no real substance there I am afraid Mr Prime Minister.

Let us not forget that George Osborne transformed Tory fortunes at the party’s conference in 2007 – and spooked Gordon Brown into abandoning plans to call an early general election – with a proposal to raise the inheritance tax threshold to £1,000,000. This would have been doubled to £2,000,000 for couples. However, the pledge was quietly dropped after the 2010 general election in the coalition negotiations and tax is still due on estates worth more than £325,000, or £650,000 for couples. We do know that the nil rate band will not be raised before the next general election, as the Lib Dems would veto it, so where does Cameron's declaration leave us? Let us not also forget thatThe Tories ran into trouble during last month's conference unveiling their plans for tax cuts without initially explaining how they would be funded.

Well, I for one think it gives us the strongest indication yet that the Conservative Party, should they get re-elected will start to look at increasing the nil rate threshold. However, I very much doubt that we will see the dizzy heights of the £1,000,000 each mooted by Osborne in 2007. The reason for this is simple, earlier this week the Treasury declared that it's income tax take was significantly down on what it had forecast despite employment being up. The Government has already borrowed £3bn more than it had budgeted for this financial year. Inheritance Tax is one of the easiest taxes for our state to collect given the way the probate system works, as basically you cannot access the deceased assets without notifying HM Revenue & Customs of their value, it is a very simple system when compared to self-assessment for example. All of this against the backdrop of our national deficit means that we are unlikely to see any meaningful tax cuts for Middle England in the near future, although we may get a perfunctory gesture of goodwill from a new Tory Government in 2015.