Only millionaires will pay inheritance tax under a Conservative government

More soon.  Click on the image on the right to enlarge the leaflet that was distributed immediately after George Osborne's well-received speech.

1.40pm: Mr Osborne's plan to lift the inheritance tax threshold to £1m was announced this morning to rapturous applause from Conservative Party members.  This is "the death knell for death taxes," he declared.  It is the third big tax and spending policy announced by the Conservatives that grassroots activists will look forward to selling on the doorsteps.

We've also had the abolition of stamp duty for first-time buyers on all homes up to £250,000 in value.  There was also Saturday's promise to abolish the penalty that penalises 1.8 million two-parent families raising children.

None of these tax cut promises will be funded by the proceeds of growth, however.  They will be funded by a combination of savings from welfare budgets and from a new £25,000 once-a-year poll tax on  businesspeople classed as "non-domiciled" in the UK; non-doms.

Speaking on Radio 4's World at One, Oliver Letwin conceded that many of the savings would only be delivered progressively - over a number of years.  This could mean some delay in full delivery of the tax cut pledges.

8pm: This from Matthew Elliott at The TaxPayers' Alliance: "When taxpayers listen to George Osborne's speech on TV tonight, they'll be very pleased with what they hear. It contained some excellent announcements. The flat fee on non-doms makes the package add up, but before it's implemented in practice, I think the Conservatives should look very carefully at whether it could drive the entrepreneurs out of the country who are making London the world's financial centre and keeping our country afloat."

Comments

[EML]

I didn't get chance to see Osborne's speech, but the content looks excellent. I particularly like reducing the number of first-time buyers who will pay stamp duty. That will save some a few thousand quid.

Also very clever to partly pay for it by increasing taxes (if only a little) for non-domiciled people. Hardly any of them will sniff at a £25,000 flat fee for registering, and it makes Brown look an idiot for not doing anything about it before.

It's all coming together quite well; a little something for everyone to be happy about: tax cuts for homeowners and families, but tax increases for polluting airlines and the super rich.

[passing leftie]

6% of estates are affected by inheritance tax - the wealthiest people in the country. The people who pay the tax are middle aged, usually wealthy, and are paying the tax out of a lump sum they are receiving in addition to their own assets.

If you want to make tax cuts, and I understand the Tory argument for them, is this really the place to look? Wouldn't you rather cut the tax for people who are still alive? Or is it simply another case of tax breaks for the rich, more taxes for the poor?

[Arthurian Legend]

Of course, if three children inherit their parents' home worth £1.2m, they will pay inheritance tax on £200,000, despite the possibility (likelihood) that the children may not be millionnaires.

[grammar school boy.]

Quite absurd to prioritise a tax cut to people inheriting £1 million pound homes over taxing income.

Further evidence that these Bullingdon boys are quite out of touch.

Eton for them but no grammar schools for us.
£1 million tax free inheritance for them, 41% tax for those who have to earn a living.
Tax on your family holiday for us, free stay at a relatives country estate for them.

[Mike Christie]

It isn't a tax cut to people inheriting £1 million pound homes, its a tax cut to people inheriting £290,000 homes, which with the way house prices are going which will bite more and more families in 'normal' circumstances.

Passing leftie, I'm not quite sure how GB invented that 6% figure, but do you really think that only 6% of uk homes are worth more than the current threshold of £285,000.

There are plenty of parts of the SE where that would only buy you a flat or an ex-council semi.

[Mike Christie]

Grammar school boy... the Grammar school has been off the agenda for many years. Even the blessed Margaret, at a time when she was dismantling and rebuilding the country wholescale didn't bring them back. The idea of the current leadership not bringing them back is hardly the u-turn its presented as.

[Jon Gale]

passing Leftie,

"6% of estates are affected by inheritance tax - the wealthiest people in the country."

It is clearly not 6% - the current threshold is £300,000, the average detached house nationwide is £323,332, in the south east it is £425,072.

http://news.bbc.co.uk/2/shared/spl/hi/in_depth/uk_house_prices/regions/html/region9.stm

This 6% figure is pure rubbish and more spin from Brown.

[Arron Fitzgerald]

Finally a policy to get excited about. I'll take the politically palatable increase in the IHT threshold to £1m (funded by a flat-rate levy on 'non-doms') as a ‘down payment’ on the gradual abolition of the tax. I despair at other commentators on this page who believe that reform of this tax should not be a priority. Anyone who believes that a substantial portion of a person's legally accumulated, post-tax wealth should be confiscated by the state upon their death is a communist - no ifs, no buts, end of story.

[John Craig]

Good speech . . . what I saw of it.

The BBC cut a lot of it on BBC Two at lunchtime, showing just the highlights - and at every key announcement panned the camera on parts of the audience who were not applauding with the main body of conference.

The commentators seem a bit frustated that no-one is rising to their biased bait about splits and who will succeed David Cameron.

You never know - it may be someone from the 2007 intake of Conservative MPs!

[Rob Largan]

Osborne's speech was excellent, much better than expected. He appeared serious and responsible and for the first time we are looking like a government in waiting.

[Chad Noble]

Er Jon and Mike,
It's not the gross house price but the net wealth that is liable to IHT.

You've got to take outstanding mortgages, loans, credit card debts etc off that house value.

[michael m]

How do you define a "first time buyer" ?
A couple can buy a home each? Divorced people etc trying to get back on the property market?
There are a lot of anolomies here to be sorted

[Raj]

I'd vote Tory on these promises - stamp duty will be a horror for me under current regs. Even worse, when my parents do eventually die I'd have to get out a 6 figure loan just to pay IHT! They're not cash-rich at all, just have a house that has gone up in value. What would happen if I can't sell the house, Gordon - flog it for a knock-down price or pay the massive interest rates out of my pocket?!

I think £1 million is fair. It will ensure everyone can leave one house to their kids without fear of massive tax bills and will encourage a prudent retirement - saving will have good results even if you don't need it all. Whereas at the moment Gordon doesn't mind if someone blows all their assets on luxuries and then comes cap in hand to him asking for benefits as they have nothing - crazy!

[Mike Christie]

Fair point Chad, but a very large number of homeowners in the sort of age-group who are most likely to die will have bought their homes 20 or 30 years ago and paid off their mortgages.

[Mike Christie]

Just to put it into context... I wonder how many people bought their council houses off Mrs T. and are now liable for IHT...

[Londoner]

I absolutely agree with Arron Fitzgerald: "I'll take the politically palatable increase in the IHT threshold to £1m (funded by a flat-rate levy on 'non-doms') as a ‘down payment’ on the gradual abolition of the tax."

This is very good news and, together with the stamp duty pledge, will play particularly well in London. After his excellent speech yesterday, Another Boris Boost (ABB).

My understanding of the stamp duty pledge is that it applies to all properties up to £250,000, so I don't think one needs to get into contorted definitions of first time buyers.

[Ken Stevens]

Spencer Wisdom | October 01, 14:12

Dispenser of Wisdom indeed!

The house I struggled to buy for £120K is now worth in excess of £400K. Combined income of my wife and me is around the national average salary for one person. My kids on below average salaries might well have to wait for us to snuff it before being able to get on the housing ladder themselves. Even though we might well downsize beforehand, in order to pass over some cash to them, that money would still reckon as part of our estate for computation of IHT if we negligently fail to last seven years beyond.

IHT certainly does not just hit the well-off and I welcome the intention to increase the threshold significantly.

[HF]

I was not in favour of this because I do not believe it is a Net vote winner. Particularly in the Midlands, North, Wales and Scotland.

We will see if the Mail and Telegraph finally stop all the attacks and back us.

[Chad Noble]

Hi Mike, yes I agree. IHT is, unfortunately, likely to become less of an issue with the passing of time as younger generations are saddled with larger debts, poorer pensions etc etc....

But good electioneering for today's older, relatively rich, voters, without doubt.

[Jon Gale]

If Chad is right then I apologise/withdraw my comment.

[Londoner]

Re mine at 14:28, actually having looked at the Party's official website, maybe he has said it is restricted to "first time buyers". This has the advantage of justifying a reduced figure for the stated cost but I am sure in practice it would have to come off all properties up to £250,000. For one thing this would discriminate against couples, unless if they were both first time buyers the limit would be £500,000?

[Adam]

IHT threshold change is a step in the right direction as is the abolition of Stamp Duty for properties up to 250K. However the non domicile tax might not yield as much money as estimated as these people might go elsewhere if their tax rate is raised. Not enough for me to swing an election but its a first step. May also be an Osbourne pitch for the leadership in worse case scenario???

[michael m]

Thank you Londoner- if there are no restrictions, the buy to let market will benefit as well, bearing in mind the majority go for the lower end of the market- but is this the purpose of the proposed cut in duty?

[Sean Fear]

6% of estates are *currently* attracting IHT. One reason it is not higher is of course down to IHT planning.

But if thresholds were left unchanged, then that percentage would rise very rapidly, given the rise in house prices over time.

[passing leftie]

Don't mix up the current value of property with the percentage of estates affected by inheritance tax. You have to die first.

The number of estates affected by inheritance last year was 6%. These are treasury figures. Can you point me at any other data?

The figure might go up a little, but so what? It specifically affects the wealthiest. Taking money from dead people seems like a pretty good idea. Wouldn't you rather spend it on income tax cuts for everyone?

Increasing the threshold just encourages house price inflation. My own view, which I'd be startled if anyone shares, is that IHT be based on the tax position of the person or organisation to whom the money is given, not the deceased.

Still, I suppose you should be pleased that I don't like it. It shows it's hitting its target market.

[Alistair]

So, The lurch to the right is now well under way

Perhaps someone will explain how increasing the IHT threshold will help the poor and the dispossessed?

It's the middle class Tories helping themselves all over again and it will be reported as such.

[Mark Fulford]

May also be an Osbourne pitch for the leadership in worse case scenario???

LOL! There are people who want Cameron's blood, but I don't think that George is who they have in mind to replace him.

In any event, the only thing worse than losing the next election would be to lose Cameron as a leader as well.

[jane]

What is particularly galling is that people's whose funds are stolen by the government under the so called 'inheritance tax' are paying for the policies such as the destruction of England which they do no agree with.

[Teesbridge]

Adam @ 1449h

Hard to see Russian oligarchs fleeing the Premier League Boardrooms for £25k/year - Mme Oligarch probably spends that in a week on shoes and bags. Neatly judged amount, I'd say.

[James Burdett]

Good policy, especially as more people fear IHT than will ever be caught by it. So in terms of appeal it is more electorally appealing than the cost of changing it.

[Deborah]

Mike Christie "a very large number of homeowners in the sort of age-group who are most likely to die will have bought their homes 20 or 30 years ago and paid off their mortgages."

-perhaps, but a fair number of them have had to remortgage their house to pay for residential care and/or hospital bills.

[Adam]

Teesbridge @ 15.15

The Oligarchs won't go anywhere but the average non domicile in the UK earns £100K and pays £26k in tax already, so this proposal will push their tax burden over 50%.

[David Cooper]

Exactly the kind of policy that will appeal to the thousands of Stay At Home Party supporters who might otherwise struggle to find a reason to turn out and vote for us as they had done in the past. You're learning, George.

[Chad Noble]

I guess the billionaire non-dom's only need to buy 10 apartment's a year costing 249,999 under the tory proposals to offset the non-dom levy and they'll have a nice additional portfolio of assets too.

[Traditional Tory]

In any event, the only thing worse than losing the next election would be to lose Cameron as a leader as well.

I think the two are inevitably to be bracketed together - unless civil war to the death is your chosen scenario.

Of course there is an argument for reducing the burden of IHT. Quite apart from the fact that I personally would be even wealthier than I am, it is transparently unfair that inflation has caused IHT to bear down on social classes whom it was bever intended to affect when Estate Duty was originally introduced.

But puh-lease don't let us go down the road of implying that this is a measure intended to help the helpless.

Already I fear that much of the triumphalist braying on this thread is of the type which will confirm in many people's minds that the party is totally out of touch with the majority of the population who do not pay IHT, even under the present system.

[Griswold]

Inheritance Tax. Cut the rate to 15% and the amount collected will double. That apart 1000's of lawyers and tax consultants will have to find better things to do.

[Mike Thomas (215cu)]

Well done George,

Whilst working, I read the speech. That was a ripsnorting.

Please, please more of the same, A clear alternative, plenty of attack and a bit of passion. There are so many people that want someone to stick it to this government badly.

Make the electorate take notice, show that you really want the job....

...and you'll get it.

[HF]

What happens if Brown simply steals the policy and does the same thing?

We then have a slogan of "Vote Conservative for a policy that the Labour Govt have already implemented", with millions of leaflets being printed today.

Afterall Brown has stolen many other ideas. So far Labour has chosen not to respond. If they call it "unfunded" then we know they do not plan to copy it straightaway.

[Mike Christie]

passing leftie, or any of the other lefties here...

A person works hard all their life, scrimps and saves, buys a house etc. etc. all paid for through taxed income. What possible moral justification is there for the taxman to help themself to 40% of it on their death?

We aren't talking about the landed gentry getting rich on the backs of peasants any more, just ordinary working people.

We have a strange attitude to property in this country. We throw our hands up in horror that a little old lady might have to move out of the big family house she's lived in for years because she can't pay the bills yet grumble about rising house prices. We worry about people not saving and living for the moment yet seem to think that its OK for the taxman to help themselves to £4 out of every 10 we might still have when we die.

Also (I'm looking at you Deborah) why is it socially acceptable to expect struggling young families to pay for one's healthcare
through tax whilst also having to try to make their own way, just to enable one to leave hundreds of thousands of pounds worth of assets to one's family. It should be the accepted norm that houses are sold or passed on when they are no longer needed. The reliance on state support has warped and perverted peoples expectations and sense of responsibility.

Its a complex and often emotional issue, but we have a very strange set of social norms regarding this in the UK and so many of the UKs problems stem from it.

[Londoner]

In the Notes to Editors to the proposals on the party's website, it states: "According to independent research by Scottish Widows, instead of 37% of households being caught in the inheritance tax net, only the top 2% would be affected."

This could be consistent with the "6% of estates" beloved of the socialists (in the context of IHT, I use the term "socialist" advisedly). I apologise for the length of this post explaining why the two figures could be consistent, and why the 37% figure is the more relevant one.

First, the Govt figures are backward looking - I am sure that they relate to some previous financial period at least a year or two out of date, and house prices (and share prices for that matter over the last 4 years) have been increasing fast.

Second, the people whose estates are being measured in the 6% figure were born on average in the early 1920s (dieing in their early 80s). Many of the 94% not paying IHT will have predeceased their spouses and so are not paying it for that reason. That age group also had a significantly lower proportion of owner occupiers than the one that followed, as the great rachets up in home ownership were in the 1950s and 1980s (look at the age profile of tenants in social housing to verify this). The next generation coming up has much more capital at age 55 than their parents did, even aiming off for inflation.

Third, it is true that many people whose estates are vulnerable to IHT now may not end up paying it because they may live to a ripe old age and need to spend much of their money in retirement, including on personal care (or have time successfully to pass it on to grandchildren etc). This highlights that the tax is as much a tax on early death, as on death per se. And yet early death is likely to make it all the more important that as much money as possible is able to be passed on. If a couple die aged 80 they are unlikely still to have dependent relatives but if they die together in a car crash aged 50, they may well still have youngish children, or even possibly dependent parents of a less affluent generation, left behind. In these circumstances IHT at present levels often means selling the family home, and depleted capital left to help the extended family/guardians etc to bring up, educate, etc., the orphans. It also means that whilst there is no IHT if the comfortably off grandparents pay for the grandchildren's school fees when they are, say, 55 to 65, if they should die at 55 and instead leave a trust for the fees to be paid after their death, there is. Why should families be penalised, and the State's coffers benefit, if parents/ grandparents happen to die young?

All of this means that the 37% of households (probably affecting a higher proportion of the population than that, as couples are more likely to live in the larger properties) whose estates are vulnerable to this tax if they die is the real proportion of people who have an interest in seeing the teeth of IHT drawn. Unlike the beneficiaries of the 6% of recent estates who, from a self-interested point of view, may no longer care as their inheritance was too early to be affected by these proposals for the future.

So, a proposal which reduces the potential cost of death for probably 40% of the population actually directly affects more voters than, say, increasing child benefit or spending more on schools (however much they may approve of these much more expensive latter priorities as general principles).

[Londoner]

HF - if Labour steals this IHT policy then the net result is that we will have greatly benefited many fellow citizens without even having to win an election. And Brown will have been demonstrated to be even more shameless than people thought. Sounds like win/win to me.

[Paul]

Of course the increase in the threshold should be welcomed but for the us to form the next government a number of seats have to be retaken in the North. I fear that this policy announcement will do very little to the average working family outside of the areas we already hold seats. Unfortunately I am in America and so have only been picking snippets up, but it is clear how many families this will benefit? Surely a proper income tax would have been better and set the pulses of stay at home tories racing!

[HF]

It looks like Labour have decided not to copy the tax change and instead have Alistair Darling now on tv saying that "Tories cannot fund the tax cut".

Unfortunately the interviewer does not ask Darling why the non dom tax would not pay for it. Why do so many BBC News24 juornos lack any understanding in what they are asked to cover?

We will see what Radio 4 PM does to the Labour response in a few minutes, come on Martha, you heard the bias claims last night!

[Yet Another Anon]

6% of estates are affected by inheritance tax - the wealthiest people in the country. The people who pay the tax are middle aged, usually wealthy, and are paying the tax out of a lump sum they are receiving in addition to their own assets.
The family home should be exempted from IHT as a logical start. If there are to be taxes on Inheritance it would make more sense for them to be on those receiving the Inheritance rather than the Estate - this would be fairer, after all a billionaire under IHT can receive a couple of hundred thousand pounds tax free whereas someone with no money could get less because of a proportion of the Estate going in Tax before they get their cut - an absurd situation.

[Bexie]

Fairly typical of the Brown and Bolshy Coop. I hope we close it as soon as we are in power.

[Traditional Tory]

The family home should be exempted from IHT as a logical start.

Why?

In most cases the family home will be sold and the proceeds distributed. Why should it be treated differently from any other assets passing on death?

[Edison Smith]

I'd vote Tory on these promises

I'm hearing this time and time again since this morning's announcements - and that's in Croydon and the surrounding areas, real Tory v Labour battlegrounds.

Keep 'em coming.

[Cleo]

Isn't the party making the same mistakes it did in 2001 and 2005? People get scared about tax reductions when they fear that the NHS and schools will suffer, even if the sums appeat to add up. I don't believe tax cuts are the salient issue they once were. I would have preferred more green taxes too, offset against income and family taxes and a move to a local income tax.

[Londoner]

UAA at 17:25 says: "The family home should be exempted from IHT as a logical start." NO, this would just stoke up the housing market as oldsters would be under pressure not to trade down their house even when it would be in their own lifetime interest to do so. You could even get people buying more expensive houses when they are getting older to shield more of their estate.

[Michael Davidson]

With regards to tax cuts, I'd rather we cut income tax than inheritance tax. Up here in the North there are very few areas where a person's net wealth is more than £300k. Labour will play this as a tax cut for the richest in society and to an extent they're right. The only people who would approve of inheritance tax cuts are people who would vote for us anyway.