But for those of us with children there is another important secondary objective, and that is to leave a financial legacy which can provide our offspring with a foundation for a comfortable life after we are gone. Yet living longer and the rising cost of doing so mean this is easier said than done – and new government figures released this week that reveal inheritance tax (IHT) receipts has topped £5bn for the first time in 2017/18 should remind us that this is an important source of revenue that the overstretched state finances can’t easily afford to give up, even if recently introduced reliefs offer some respite to the bereaved. Indeed, by 2020 it will be possible to pass on a £1m estate with incurring IHT.
No surprise, then, that inheritance is a social and political hot potato, because such generosity towards the already wealthy does not sit well with many on the left of the political spectrum. Those who defend the right to pass on wealth argue that IHT is a form of double taxation – according to surveys it is the most hated tax in Britain, despite the fact that it is paid by relatively few. Opponents suggest it is unearned by the recipient and should be taxed as any other income, and that much inherited wealth is simply the result of one’s parents’ good luck in the property market upon which no gains tax has ever been paid.
Should Jeremy Corbyn’s Labour party make it into government – and current polling suggests this is a distinct possibility – it is likely that ‘reforming’ inheritance tax would be high on its list of political priorities, although after much speculation no mention of IHT made its way into last year’s Labour manifesto – politically astute, some may say, when considering the devastating electoral effect of Theresa May’s related ‘dementia tax’ policy. Some are worried that other popular ways to mitigate IHT including investing Aim shares or VCTs may also come into their crosshairs
Whatever the political future holds, inheritance is likely to become an even greater issue – the effects of the demographic trends we discuss in this week’s cover feature make that a certainty. And for the many IC readers who have more than achieved their lifetime financial objectives, careful planning to achieve a financial legacy will become more important than ever.
