Stealth taxes return

Who was the last (or current) British MP you felt you could really trust? A person who stuck to their guns and beliefs irrespective of the findings of low-sample opinion polls or the unnecessary verbal aggression displayed by some television interviewers?

I can think of two. One Conservative, one Labour, neither of whom currently occupies a prominent position either in the Cabinet or Shadow Cabinet.

It’s a sorry state of affairs which annoys voters, few of whom are as thick – and nor are their memories as impaired – as our political masters might imagine.

Prior to the last election, the Conservatives unequivocally pledged to raise the inheritance tax [IHT] limit to £1 million. Indeed, in his speech the 2007 Tory party conference, George Osborne was widely credited with reviving the party’s electoral prospects when announcing that, should he and David Cameron emerge victorious at the general election, this pledge would be on the statute books in double-quick time.

Thanks to Google, I’ve just been able to re-read Mr Osborne’s speech. Let me quote the most relevant part.

“This unfair tax [IHT] falls increasingly on the aspirations of ordinary people.

“These are people who have worked all their lives. People who have saved money all their lives. People who have already paid taxes once on their income.

“People whose only crime in the eyes of the taxman is that instead of spending their savings on themselves, they want to pass something on to their families. People who feel the most basic human instinct of all: they aspire to a better life for their children and their grandchildren.”

So what happened? How did this most ‘basic human instinct’ get relegated? How did a ‘totemic’ commitment that Mr Osborne and Mr Cameron argued would benefit four million Britons happen to be jettisoned?

Only nine weeks ago, the Chancellor actually announced modest 1% annual increases in the IHT threshold which were scheduled to be introduced prior to the next election, but even this undertaking has been abandoned. Freezing the threshold at £325,000 effectively means that a pivotal Cameron / Osborne commitment, one responsible, at least in part, for their subsequent election victory, has been discarded. No-one voted for freezing the IHT threshold.

Is it any wonder that voters are suspicious of politicians? One gets the impression that policy is being made up on the hoof – why announce something and then drop it two months later? Does anyone in Downing Street understand the bigger picture?

Chief executive of the Taxpayers Alliance, Matthew Sinclair, was spot-on when he said the government was ‘picking people’s pockets’.

“Inheritance tax is a deeply unfair double tax which has been levied on assets that will have already been paid for by income the taxman has already dipped his fingers into,” he said.

“In opposition, the Chancellor was critical of his predecessor’s love of stealth taxes; it seems like not much has changed in the Treasury since.”

Great Britain used to be admired for its sense of fairness, but this deeply pernicious tax, initially intended to be levied only on extremely wealthy landowners, is an excellent example of why we’re now viewed as yet another high-tax country operated by a so-called ‘metropolitan elite’ intent only on lining their own pockets. Scandalously, the IHT threshold will remain frozen until at least 2019.

If, when you die, the value of your estate exceeds £325,000 (or £650,000 if you’re married or widowed), literally EVERYTHING of value you own beyond this threshold is liable for a 40% inheritance tax charge.  

It’s crazy to delay making plans to either reduce, or possibly eliminate, this potential liability. I would wager a lot of money on the fact that most MPs have already done so – they’re not about to be caught out by IHT and nor should you, dear reader.  

posted on 19 February 2013 12:20 byPJS