Jeremy’s tax bargain on inheritance tax and pensions

In an interview with the BBC, Mr Hunt refused to rule out a cut to inheritance tax, saying:

“The best way that we can reduce the tax burden for everyone is to grow the economy.”

If there is one thing that everyone is agreed on is that we need to “grow the British economy”.

Though inheritance tax only actually impacts 4% of the population, it is a bogey tax for many more who aspire to the levels of wealth at which it could be paid.

So inheritance tax is a lot more emotive than it should be.

Inheritance tax, like the LifeTime Allowance that was scrapped earlier this year, is a tax that the Treasury may concede creates more problems than it solves.

So I can see why a bargain with the public that swaps an unwanted problem for support for the re-risking of the economy, is a deal that the Chancellor would want to make.

The “re-risking” of the economy is focussed on the Mansion House reforms that aim to inject pension money into productive finance.

The problem that the Chancellor has is that he cannot be seen to be pandering to his back-benchers by channelling tax-reliefs to a small number of hardcore supporters – a kind of “super-cronyism” . The problem is more than political, the taxation system is balanced by a benefits system – like a barbel.

The Chancellor wants to cut benefits, but by cutting taxation at the same time, this looks like too much for most people to stomach. There really needs to be some kind of quid per quo.

Yesterday I argued that the quid per quo for an inheritance tax-cut , could be the reform of the taxation of pension pots so that those above state pension age, are liable to inheritance tax on the  unspent pot.

This in turn would be a quid per quo for those in pensions who consider the proper business of retirement saving is to provide a wage for life – rather than a capital reservoir.

Certainly recent comments from the Pensions Regulator would suggest that Government policy is increasingly focussed on a retirement system that is about the payment of pensions.


Making the sums add up

The overwhelming concern for the chancellor and the prime minister to respond to is to help families and firms feel consistently better off. The drama that’s consumed Westminster these last seven days isn’t likely to make much difference to that.

Jeremy Hunt has a chance to change that on Wednesday. But it’s just not clear that the neighbours in No 10 and 11 can make the sums, and the politics, add up.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in pensions and tagged , , , , , . Bookmark the permalink.

1 Response to Jeremy’s tax bargain on inheritance tax and pensions

  1. John Mather says:

    The IFS have often reported that 22 million of working age don’t earn enough to pay tax. This group are unlikely to make voluntary NI contributions and May rely on other exemptions to earn the NI record to get a full state pension.

    The top 1 % of earners pay 33% of all income tax as do the 24 million basic rate tax payer and the 4.5 million higher rate payers

    1.2 million people came to Britain last year to live and 550,000 people left the U.K.

    Where do you think the most effective effort should go to raise the productivity per capita?

    It certainly is not in encouraging highly productive to leave when other countries are going out of their way to attract them.

Leave a Reply