The great wealth transfer has been dominating headlines in recent years, particularly as debates of intergenerational inequality have reached fever pitch. The reliance on inheritance to improve the lives of those that receive it is revealed in the latest ONS figures which show Inheritances received by those in the lowest wealth quintile made up 44% of their net total wealth. However, the average age at which people can get assistance from their older loved ones is getting later and later as government policy encourages people to pass on wealth on death.
The figures from the ONS reveal anticipated trends, including the age that people can expect to inherit is edging into mid-60s, while those aged 25 to 34 are most likely to get gifts or loans from family, consistent with the rise of the bank of mum and dad as one of the prime lenders for first-time buyers.
In 2018 people are living longer and retired households are at historic highs in terms of the wealth they hold relative the working-age population. One way to ease the pressure on the younger generations is to allow wealth to filter down more easily. The annual IHT gifting allowance is living in the past, having been frozen since 1981. Had the annual allowance tracked inflation, it would be permissible to gift £10,932.20 per tax year in 2017, according to the Bank of England inflation tracker.
The Office of Tax Simplification is expected to produce the first half of its finding on how to simplify inheritance tax imminently. Details were conspicuously absent from Hammond’s speech yesterday and given the government currently rakes in £5.2bn a year from inheritance tax it may be they aren’t keen to start an overhaul which will reduce their tax take given the budget give-aways. However, a fundamental overhaul is what people want: research for Quilter* shows 63% of UK adults think IHT is an unfair tax and 14% don’t know. Given inherited money is money taxed twice, that feeling is understandable.
Sands may have begun to shift from tinkering with personal taxation to cracking down on global corporates, as Hammond announced a consultation on a digital services tax against global tech companies making large profits in the UK. This could be a welcome change of tack to use global corporates to boost coffers rather than double taxation of wealth.
*A national representative survey of over 2,000 UK adults