Savings are deferred income. Thus the income tax should equally be deferred. That should then be paid when the savings are released for expenditure. So released capital would be liable to full income tax on the full amount and Capital gains tax would be superfluous.
Savings are deferred expenditure, *not* deferred income. For the most part (profits on the sale of own main residences being the main exception) savings are the total of lifetime, accumulated, *post* tax income. Charging IHT on top is effectively saying that not enough income tax was charged in the first place and additional tax should be charged as a penalty for not spending it and paying VAT.
People not surprisingly resent paying 40% tax on capital they have already paid tax on in the accumulation phase. What a tax on death should do is to capture those parts of capital which have not been taxed as accumulated so as to encourage self sufficiency during lifetime and not being a burden on the State.
My view is that the correct solution is to abolish IHT but make death a chargeable event for CGT purposes. This would therefore bring into tax all unrealised gains at death. The own main residence exception should also drop away at death so that profits on the house would be subject to CGT. The same logic would apply to assets in tax free wrappers such as ISAs and pension funds. Obviously the usual CGT rule about transfers to a spouse would apply so that tax would only become payable on the second death. And some sort of indexation, or a low rate to keep things simple, would be necessary to prevent gains accumulated over decades which are highly illusory due to inflation being taxed.
This would be equitable and avoid the double tax factor.
Savings are deferred income. Thus the income tax should equally be deferred. That should then be paid when the savings are released for expenditure. So released capital would be liable to full income tax on the full amount and Capital gains tax would be superfluous.
Savings are deferred expenditure, *not* deferred income. For the most part (profits on the sale of own main residences being the main exception) savings are the total of lifetime, accumulated, *post* tax income. Charging IHT on top is effectively saying that not enough income tax was charged in the first place and additional tax should be charged as a penalty for not spending it and paying VAT.
People not surprisingly resent paying 40% tax on capital they have already paid tax on in the accumulation phase. What a tax on death should do is to capture those parts of capital which have not been taxed as accumulated so as to encourage self sufficiency during lifetime and not being a burden on the State.
My view is that the correct solution is to abolish IHT but make death a chargeable event for CGT purposes. This would therefore bring into tax all unrealised gains at death. The own main residence exception should also drop away at death so that profits on the house would be subject to CGT. The same logic would apply to assets in tax free wrappers such as ISAs and pension funds. Obviously the usual CGT rule about transfers to a spouse would apply so that tax would only become payable on the second death. And some sort of indexation, or a low rate to keep things simple, would be necessary to prevent gains accumulated over decades which are highly illusory due to inflation being taxed.
This would be equitable and avoid the double tax factor.