UK Inheritance Tax

  • UK’s Inheritance Tax (IHT) system seems broken.
  • The effective rate looks very different to other countries and raises less than it should.
  • In addition, take this chart from HMRC’s (UK tax authority) analysis of 2016/17.
  • It shows estate values on the x-axis and the effective tax rate on the y-axis.
  • Notice the huge drop off for large estates (£9m+).
  • It turns out the IHT is only progressive for mid/upper-mid classes.
  • There are plenty of reasons why this is (listed in the article).
  • IHT is “a tax with a terrible combination of a high rate (which makes it unpopular and drives avoidance) and poorly targeted/overly-generous exemptions (which then enable avoidance).
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