Inheritance tax is one of Britain’s most hated taxes -- but is the outrage justified? Kristian Niemietz sits down with Rory Meakin, Research Fellow at the Taxpayers’ Alliance and author of a new IEA paper on inheritance tax, to examine what this tax actually does, how much it raises, and whether it makes any economic sense. From the farmer protests that pushed the issue back into the headlines, to the surprising fact that Britain sits in the global top five for inheritance tax rates, this conversation cuts through the politics to look at the hard numbers.
Rory and Kristian explore the serious practical problems with inheritance tax -- from the near-impossible task of valuing a privately owned family business, to the compliance costs that fall squarely on grieving families rather than the state. They also tackle the ideological debate head-on, revealing that the case for a 100% inheritance tax has been made not just by left-wing commentators, but by figures like James Buchanan, the Nobel Prize-winning father of public choice economics -- and they explain why that argument ultimately fails in the British context.
The conclusion is striking: inheritance tax doesn’t raise much revenue, likely damages savings and investment, and is the least popular tax in Britain -- yet the current system is more punitive than most comparable countries, particularly when it comes to passing wealth to your own children. Rory sets out what a reformed system could look like, including raising the threshold to £2 million -- which would remove 95% of estates from the tax altogether -- and explains why, even if full abolition is off the table, there are straightforward ways to make this tax far less damaging.
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