24 Sep 2014

There is a widespread view in what passes for middle-England that people have a right to leave their wealth to their descendants. It seems odd that, in a country where demonising privilege has persisted as a mainstream political sport, we mostly seem to be more than comfortable with the idea that success or fortune should pass from one generation to another. But it turns out that even ideological turkeys do not vote for Christmas. “According to May 2014 research by Skipton Financial Services Limited, 48pc of under 40s expect to receive a large inheritance from their parents. Of these people, one in five are banking on an inheritance to get onto the housing ladder, and 17pc are relying on it because they have no pension set up. Other stated reasons for hoping for an inheritance include starting a family.” Daily Telegraph, 1 Sept 2014 Accordingly, politicians are frightened of this subject. David Cameron has called the desire to pass on your (hard-earned, responsibly saved) money to your children as “the most natural human instinct of all”. It’s parenthood from beyond the grave. It was reported that in 2007 the opposition Conservatives scared off Gordon Brown from calling a snap general election by pledging to raise the inheritance tax threshold from £325,000 to £1 million. Although Labour pointed out that this was a policy designed to benefit a relatively few relatively wealthy families, it backed off in the face of evidence that the Conservative pledge was popular. (To this day it remains no more than a pledge – it did not survive the coalition government). At present, the law says that an individual may leave £325,000 tax free above which level the rest of the estate is taxed at 40%. At first glance this is generous. Then one looks at UK property prices, particularly those in London and the South East. The average property price in London is now £499,000, in the rest of the South East it is £326,000 (source: ONS, June 2014). If the “family home” is worth the London average of £500,000, it will be liable to £70,000 of inheritance tax when the last exempt person (e.g. spouse or civil partner) has...