Money for nothing? An assessment of tax reliefs and wealth inequality
Money for nothing? An assessment of tax reliefs and wealth inequality
Tuesday 2 Apr 2024CAGE Research Associate Dr Arun Advani is one of 21 tax experts and political influencers writing for a new collection of essays, A wealth of opportunities published by independent think tank Bright Blue and independent charitable trust abrdn Financial Fairness Trust.
The publication brings together a range of experts and political leaders to offer a fresh and radical centre-right vision to help people on modest incomes build up and pass on wealth.
Dr Advani’s essay critically assesses inheritance tax reliefs and wealth inequality. His contribution sits alongside analysis and ideas from Sir Sajid Javid MP, Lord David Willetts, Baroness Nicky Morgan, Sir Steve Webb, Tim Leunig and many more.
Discussing inheritance tax, Dr Advani describes a system which is skewed “in favour of the well off and well advised”, recommending three steps to simplify the system to make a fairer more equitable tax which could also provide additional revenue. He suggests:
1. Abolishing or capping the tax relief on agricultural land and business assets.
2. Treating pension pots passed on at death (which currently avoid taxation) in the same way as other assets.
3. Removing the ‘residence nil-rate band’ (RNRB) - which currently provides additional tax-free amounts to property owners - and extending the general £500,000 general tax-free allowance.
In his essay Dr Advani says:
“Putting these reforms together would result in taxation at death that was fairer, less distorting of people’s choices about how to hold their wealth, and harder to avoid. It would shift the burden of inheritance taxation away from those with smaller taxable estates and substantially increase the tax rate on estates worth over £5 million.”
His contribution suggests that these reforms would only be the first step in a larger project needed to improve taxation on the transfer of assets. As wealth inequalities become more pronounced and inheritances continue to grow, the need to change the status quo and improve the design of inheritance tax only becomes more important.