The Budget 2012
Chancellor of the Exchequer George Osborne’s third budget was skilful in that it did what was right for the economy while doing what was fair for the individual.
One area which deserves scrutiny but was put aside for another time was Inheritance Tax. This along with Capital Gains Tax raise less than 2% of the Government’s revenue while using up a disproportionate amount of the HMRC’s time and limited resources.
Capital Taxes
The current threshold for Inheritance Tax starts at only £325,000 unchanged since April 2009. Capital Gains Tax was increased from 18% to 28% although the Chancellor has raised the ER threshold, replacement for business retirement relief, from £1million to £10 million in only three years.
Capital Gains Tax
These two taxes attack the cornerstone of prosperity. One robs the creators of wealth of the spoils of their labour while the other erodes the store of wealth.
Britain’s rise to greatness in the 17th and 18th centuries was due to many factors but it was funded in large part by great estates which were left intact from one generation to the next. This created a long term store of wealth.
Contrast this to the French system of the time which divided everything amongst all the surviving children. A productive farm divided between ten or more quickly became a collection of allotments incapable to feeding its ever increasing number of owners. It ended with the French Revolution.
Inheritance Tax
Today when someone dies the value of their home and possessions are all totalled up. If the figure crosses the threshold of £325,000 then the balance is taxed at 40%. The net is finally shared between the beneficiaries after the undertakers, lawyers and accountants have all been paid.
Houses in London and the South East are more expensive than the rest of the UK. Old pots and pans can quickly turn into priceless works of art in the eyes of HMRC District Valuer.
Invariably the family home has to be sold and the contents distributed. This endangers the tradition of longevity which the family and village so enshrine the British way of life.
It’s time for Capital Gains Tax to be abolished and the Inheritance Tax threshold raised to £1 million with a flat rate of 10% thereafter.
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