No, this is not a good idea

It’s possible that there are good adjustments that can be made to inheritance and capital gains taxes - abolishing them might be a starting point for discussion - and also possible that there are bad ones. This is a bad one:

“There are some reliefs I think there is a very good case for getting rid of,” Adam says.

If someone buys an asset that appreciates significantly during their lifetime, they can for example pass it on to their heirs. The person inheriting it is then only liable for any price gains since they inherited it.

“That is a particularly silly and damaging feature of the system,” Adam says.

“I think there is something to be said for bringing rates of tax on capital gains more into alignment with income,” he says.

To turn to an actual example that one of us knows about. An estate that will be subject to inheritance tax when that dismal day - hopefully long delayed - arrives. Upon which the suggestion is that CGT is at income tax rates and IHT is also payable.

Within that estate is a position in what used to be Vibroplant. Actually a founding shareholder for a couple of hundred quid or so. That’s how the company started in fact, a whip ‘round among Northern professional engineering types a generation or two back.

At valuation date for IHT the value of that stake (whatever it is, no, not known) will be “stepped up” to current market value not original purchase price. Then taxed at 40%. That’s what this “step up basis” is, that death is a crystalising moment for previous capital gains. Having paid 40% then the starting point for any inheritors is the market value that has already been taxed. Which seems fair enough.

The new proposal is that the 40% is taken then on top of that a 45% CGT on the capital gain itself. Which seems more than a little punitive. Note also that no one is suggesting the return of an indexation allowance so that two taxes are charged on 60 years of inflation, not just real rises in value.

We’d suggest that this is, actually, not a good idea. In fact we’d suggest that it’s a very bad one. 80% taxes and more on productive investments in the British economy would have something of a dampening effect upon productive investments in the British economy, no?

You know, the first rule of economics, incentives matter?

Tim Worstall

Yes, yes, whinge away about the whinging on taxes to be paid - then consider the actual point.