Tories inheritance tax plans 'will benefit wealthiest' - IFS

Posted On: 
12th April 2015

Conservative plans to cut inheritance tax will disproportionately benefit the children of wealthy parents, according to the Institute for Fiscal Studies.

The Tories have announced that they would introduce a transferable ‘family home allowance’ worth £175,000 which, added to the existing £325,000 threshold for inheritance tax, would allow parents to pass on homes worth up to £1m to their children without paying tax.



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However, in a statement the IFS said: "Since the children of those with very large estates are disproportionately towards the top of the income distribution the gains from this (and in fact any) inheritance tax cut will also go disproportionately to those towards the top of the income distribution."

Paul Johnson, director of the IFS, told Radio 4’s The World this Weekend: "Less than 10% [of estates] pay inheritance tax at all at the moment. This particular change will probably reduce the inheritance tax liabilities of between 20,000 and 30,000 estates each year. That's out of something like half a million people who die each year."


The proposal has also been attacked by the chairman of the Social Mobility Commission. 

Alan Milburn, a former Labour Cabinet minister, said the £1bn scheme was “not the right priority and will not improve social mobility” and described it as a “slap in the face” of young people trying to get on the housing ladder.

"This is a missed opportunity to do something for the many young people who want to move up and get on," Mr Milburn said.

"It seems to have been designed to appeal to an inner core as part of a divisive core vote strategy. It is not the way to make Britain fairer or more socially mobile."

Mr Johnson also said that the proposal which increased the “tax privilege associated with an asset like housing” will “drive up” prices in the long run.

Referring to the Conservatives plans to alter pension taxation to fund the proposal, Mr Johnson said it could be “worth less to earn more” and have “damaging effects” on work and saving incentives.


Lib Dem Chief Secretary to the Treasury Danny Alexander also voiced his concerns over the Tories proposal. Mr Alexander said the Conservatives had the wrong “priorities” and were favouring tax cuts for the “better off”.

He told The World This Weekend: “The Tories had plans to cut inheritance tax at the last election which they dropped in the coalition negotiations because we insisted that all the money we had to spend on tax cuts should go to tax cuts for working people.

“I think what you see today is actually what we have seen in government over the last five years which is the Liberal Democrats with the priority to cut taxes for workers and the Tories with the priority to cut taxes for the better off.”