Developing credible, fair options for taxing inherited wealth in the UK
The project aims to shape the debate about inheritance and develop policy options for taxing inherited wealth in the UK, through public deliberation.
The UK has entered a ‘New Age of Inheritance’. The real value of inheritances has doubled roughly every twenty years since 1979, a trend expected to continue to 2045; inheritances and gifts are worth over £100bn per year in the UK. These changes are set to reinforce existing inequalities, including income and race. For example, those with the least wealthy parents (the bottom fifth) will receive a 5% increase to their lifetime income through inheritance, but those with the wealthiest parents (the top fifth) will enjoy a 29% boost. The vast majority of these inheritances are passed on completely tax-free.
Develop policy options for the fair taxation of inheritances. Reform options would consider:
- Amendments to the current policy, such as changing exemptions and thresholds;
- New approaches to taxing inheritances, such as taxing receipts instead of estates, shifting from the flat rate of 40% to a progressive rate which increases with the size of the inheritance, or increasing rates for people with higher wealth or income;
- Hypothecation, including both soft and hard hypothecation and different public spending uses.
These policy options will then be discussed in detail by focus groups, who will also help to identify how to communicate changes. Options will then be tested via public opinion polling as well as modelling of the fiscal impacts and distributional impacts of the policy options.
Throughout the project there will be work to shape the debate relating to inheritance tax, aiming to support champions of reform and attract new supporters.