Inheritance tax has been with us in various shapes and forms for more than 300 years. It divides opinion. It is charged at a steep 40 per cent on the value of estates in excess of £325,000 although there is a further exemption for those passing on their home to offspring.
Some politicians, primarily Conservatives, hate it and believe it should be abolished.
Others – including those on the Left of the political spectrum – argue that it should be reformed with the tax being paid by those who receive the proceeds rather than from the estate of the deceased.
The taxman cometh: Although thought of as paid only by the wealthy, inheritance tax has increasingly become a revenue-raising weapon
Although thought of as paid only by the wealthy, inheritance tax has increasingly become a revenue-raising weapon. The nil-rate band has been stuck in deep mud at £325,000 since 2009 and it looks as if it is staying there until 2028 – maybe later – as this Government and the next one attempt to mend the nation’s finances.
As a result of this classic case of fiscal drag (a Conservative speciality), more estates are being sucked into inheritance tax territory. The latest statistics confirm that the amount of tax raised from this death duty shot up in the six months to October this year by 14 per cent to £4.1billion. The Office for Budget Responsibility, a scrutineer of Government figures, estimates that inheritance tax receipts will rise to £7.8billion in the tax year ending April 5, 2028, compared to £6.1billion in the tax year ended April 5 this year.
Of course, there are plenty of ways in which inheritance tax bills can be kept down – for example, through making gifts to family and friends, putting life assurance policies in trust and having an up-todate will in place. Employing a good financial planner will also pay for itself in tax saved.
‘The key is to plan for the tax as soon as possible,’ says Jessica Ayres, a chartered financial adviser with Timothy James & Partners, who I met for coffee last week.
‘As Benjamin Franklin, one of the founding fathers of the United States of America, said: ‘In this world, nothing is certain except death and taxes.’ So ensure you leave as little as possible of your hard-earned assets to the taxman.’
Absolutely. Well said Jessica.
Good to see Nationwide touting for business
How good it is to see Nationwide Building Society attempt to cement its place on Wokingham’s high street by touting for business.
Although Wokingham, my home town in Berkshire, is in expansion mode, it hasn’t stopped Santander from closing its branch in recent months. Nor has it prevented NatWest from announcing its intention to pull the plug on its branch in February.
Nationwide has responded by putting a notice on its window stating: ‘If your local bank is closing, why not join a building society instead?’ Why not indeed.
Death charges are barking mad
Inheritance tax aside, the Government doesn’t profit much when we eventually shuffle off this mortal coil and our funerals need to be arranged by loved ones.
As a result, the funeral director’s costs (covering everything from the coffin through to the hearse) and the bill for the cremation (or burial) are all VAT exempt – as are death certificates and the fees payable for the church service.
Barking mad: pet lovers have to pay 20 per cent VAT if they want their recently departed dog or cat to be buried or cremated
Yet there are some baffling anomalies. For example, pet lovers have to pay 20 per cent VAT if they want their recently departed dog or cat to be buried or cremated. Why? Barking mad, I say – many people I know grieved more over their departed pet than they did over their former partner. Similarly, it seems rather cruel that someone paying for the publication of a death notice in a local or national newspaper must pay VAT on the bill.
The tax is also charged if a loved one wants to purchase a headstone or memorial plaque that they can subsequently visit and pay their respects to (my dad’s memorial plaque in the gardens of Sutton Coldfield Crematorium on the outskirts of Birmingham is a must-go-to whenever I visit my mum).
Why these random death charges? It all seems so cruel and unfeeling. I know times are hard and the Government is scrambling around for every penny it can grab in tax, but time, methinks, for a rethink.
Always read the terms and conditions
It’s a message I have preached for many a year.
Sadly, I have a confession to make. I have failed to adhere to it in my domestic life.
For the past six weeks, I have been merrily washing my clothes with Fairy Platinum All In One Original dishwasher tablets – not even latching on to the fact that something may have been awry when my pants and socks were coming out of the wash almost starched. Even the odd itch here or there failed to alert me to the error of my ways!
Only when my friendly cleaner asked why I had two packets of dishwasher tablets in my cupboard, but no washing powder, did the penny drop. I have now acquired some washing tablets. As I said at the beginning, always read the small print – and, crucially, the label as well.
Financial education is a must
Star: Yasmeen Abbas
I am a big believer in personal finance education. The more financially aware children are when they leave school at 16 or 18, the better prepared they are to face up to the myriad of loan sharks, scammers and spinners of cryptocurrency financial miracles that will come their way.
It’s why I recently spent a Sunday judging entries for Interactive Investor’s Personal Finance Teacher of the Year Awards.
What struck me reading through the excellent shortlisted entries was the imagination, creativity and passion of all the teachers. So, to the winners of the primary school and secondary school teacher awards, a massive congrats.
Yasmeen Abbas, St Silas Church of England Primary Academy, Blackburn – you are a personal finance teaching star. The same goes to Emma Baker, who teaches at Caldicot School in Ysgol-Cil-y-Coed in Monmouthshire. Winners in so many ways.
The hidden ‘treasures’ in my office
I have been clearing out my office ahead of a move across the road (no, I’m not leaving quite yet).
Amongst the treasures I discovered were a Complete Guide To Personal Finance written by my good self (2002) and Jeff’s Lunchbox (an amusing insight, even though I say it myself, into the rumbustious relationship between financial journalists and public relations advisers).
Also, buried under the office rubble was a splendid hardback edition of Toby Walne’s 101 Extraordinary Investments (covering everything from Action Man to World War paraphernalia) and Mark Dampier’s guide to Effective Investing – where he boldly stated (in 2015) that Neil Woodford was the ‘best fund manager currently working in the UK’.
Although Woodford was at the time working at Invesco, Mark’s enthusiasm for Woodford helps explain why Hargreaves Lansdown, where he worked, recommended investment fund Woodford Equity Income right up until the day it was suspended in 2019 – and subsequently dismantled.
For the record, all four books are available on Amazon at £0.63, £6.53, £3.53 and £0.95 respectively. Only my lunchbox and my colleague Walne’s book (once popular in South Korea), have maintained a semblance of their value. Stocking fillers they are not.
