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PETER McGAHAN: Inheritance tax changes – yawn!

Inheritance tax remains unpopular for many reasons
Inheritance tax remains unpopular for many reasons Inheritance tax remains unpopular for many reasons

THE government has mooted a potential change in inheritance tax rules. It is being put forward as a potential election winner, but the belief is that the ‘changes’ are just to be written into a manifesto, so we are probably more likely to see ET returning, even with today’s phone systems. We just know how governments don’t follow through.

Inheritance tax is unpopular for many reasons. Having been taxed in so many ways throughout our lives, being taxed at death is a tad boring. Do you remember when you could go to see a seriously ill relative at a hospital and didn’t have to pay a tax called parking?

Inheritance tax is rated as the least popular tax, well below value added tax (VAT), a tax where I cannot see how they add any value at all!

Inheritance tax doesn’t really raise that much for a government. I don’t see its purpose, or motivation. It raises less than 0.5 per cent of national revenue for OECD countries.

For many, it’s a message to lift your wealth to a certain point and stop.

Thoughts on how it might be altered were put forward by one of the governments ‘think tanks’ (long sigh). They think taxing people on gifts during their lifetime over £125,000 is a good idea. No. To help an economy you don’t want to hoard assets. Families will pass money onto their children earlier if they are encouraged to do so, thus stimulating the economy further.

A warning has been given regarding Sunak’s lowering of inheritance tax that it would result in a tax elsewhere, thereby somehow verifying that they need the money. Some basics for the government on their financial planning is required, like I would advise my children on in managing their finances – curb your spending.

Reports show that Sunak oversaw nearly £26.8 billion in waste. Luxury dog beds and pieces of unused art worth over £500,000 aren’t good uses of money. I know £26.8 billion doesn’t sound much! And £7.94 billion in overpriced, unused and unsuitable PPE, let alone the mind-blowing contract offered to PPE Medpro are the tip of the iceberg.

This brand-new company received over £200 million from the UK taxpayer after Baroness Michelle Mone referred it to the VIP fast lane for Covid contracts. It made £100 million in profits, of which just £900,000 was paid in the UK, while the UK tax payers money went offshore into trusts, yachts, racehorses and private jets. Meanwhile key beneficiaries stood outside their mansion on a 154-acre estate with a helipad, and clapped on TV for the NHS, stating they appreciated “each and every one of you”. That’s just so nice.

Whether it’s your home, business, or a government budget, stick to the basics when budgeting. If your windows are broken, turning the heat up won’t help unless you are sat on the heater. It may be better to fix the windows and insulation. While that’s a metaphor for how we budget our money and government money, it’s serious. We wouldn’t run private companies like we run government – we would simply run out of money.

Is it better to have just four workers leaning on a shovel rather than five? That’s a 20 per cent cut in expenditure. In short, the assumption shouldn’t be that we need to raise more money via taxes and an unpopular one at that, it’s that we need to stop wastage first, and then spend our money on sustainable spending and energy of course.

:: Peter McGahan is chief executive of independent financial adviser Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority. If you have a query on inheritance tax call Darren McKeever on 028 6863 2692, email info@wwfp.net or visit www.wwfp.net