100% inheritance tax would trigger ‘misery’ whereas wealthy dodge levy

Introducing an 100% inheritance tax could seem at face worth a radical option to redistribute wealth guaranteeing wealthy households must share their property with others.

But specialists have informed Express.co.uk such a coverage can be grossly unfair and troublesome to manage.

Fiona Dodd, personal shopper associate at Mayo Wynne Baxter, mentioned: “The risks of introducing 100 per cent inheritance tax include spawning even more of a tax avoidance industry than already exists in the UK.

“Those wealthy enough to take advice would probably be able to get around it, so it will simply and sadly hit those who can’t afford to pay for advice.

“It will be counterproductive if there are no exemptions, for example if it breaks up businesses and other wealth generating ventures to pay the tax.”

She additionally warned such a coverage would discourage funding and would trigger enormous heartache for Britons.

Ms Dodd mentioned: “It would result in incredibly cruel emotional trauma for anyone who needed to get rid of family possessions to pay the tax, while encouraging people to hide their wealth.

“Another risk is families would pass on their money too early, which could then be lost in divorce.

“Additionally, it would make vulnerable people more likely to suffer financial abuse, which would be disguised as tax planning.

“The only benefits are that it could be viewed as egalitarian and it might invigorate the property market as people may have to sell to pay the tax.”

She additionally mentioned an 100% levy may encourage financial exercise as individuals will spend extra and cross on cash to their family, however as nobody is aware of when they may die, it will be laborious to get the timing proper.

The skilled additionally warned there would should be some type of provision to pay for an individual’s care in case they gave every thing away to keep away from the tax.

She mentioned the coverage would the truth is be extra more likely to discourage financial exercise as individuals wouldn’t be incentivised to accrue wealth to cross on to their household.

She warned such a change may trigger a glut of property for gross sales resulting in a melancholy in costs and an extra hit to the economic system.

Ms Dodd mentioned: “It’s important to note that 100 percent inheritance tax would also prevent the poor from holding onto their wealth and passing it on to their family to help them.

“Yes there would be equality but only in terms of the misery it generates. However, the rich would be likely to find a way around it, thus rendering any system even more unequal.

“Forcing each generation to start again does not promote long-term thinking in terms of caring for land or businesses.

“Instead, it incentivises get rich quick, short term riskier strategies as there is no incentive to leave your children any kind of legacy.”

Elisabeth Squires, wills and probate solicitor at Britton & Time, spoke concerning the potential advantages of the coverage.

She mentioned: “A common argument when the subject is mentioned, is that it will encourage people to work harder as they cannot depend on their inheritance to provide for them.

“Knowing that the only way to increase one’s wealth is to earn it by working would increase productivity in the workplace as people compete more with one another to receive a substantial payout.

“With this rule in motion, it is highly likely that our class system would then begin to dissipate and equalise as the rich and the upper class would then have to earn their share instead of inheriting it from their families or other close companions.”

She mentioned the tax income increase would additionally present extra funds for infrastructure reminiscent of faculties, hospitals and leisure amenities.

But she warned those that depend upon their inheritance may very well be plunged into poverty if the taxman took all an individual’s property upon dying.

Ms Squires added: “Moreover, the risk of poverty among the elderly may also increase as people potentially “miscalculate” their spending inside their lifetime.

“With a chance that economic activity may increase, people are less likely to save their earnings, spending their income without having to worry about the younger generations or those who would have inherited.

“When the time comes to retire, there may be a chance that elderly people realise that they have not prepared for their retirement and do not have enough funds to live on.”

For the newest private finance news, observe us on Twitter at @ExpressMoney_.