Ben Wilkinson Personal Account

Only the deluded think inheritance tax is fair – it has too many loopholes and is a levy on the unprepared rather than the rich

Rishi Sunak’s Government could be on the brink of doing something truly meaningful – ridding Britain of inheritance tax once and for all.

But strap yourselves in. Between now and the Budget on March 6, the wails of protest will grow louder and louder. The more seriously ministers consider axing the death tax, the greater the cacophony will be.

We will hear the same, tired arguments raised again and again. Critics will insist that only the extremely wealthy need worry about inheritance tax. The figure most commonly flung about is that only 4pc of estates actually pay death duty charges. Thanks to inflation and the decision to freeze thresholds, this is forecast to surge to 12pc in less than a decade.

Putting that aside, the 4pc does not give us a true picture of how many people are really affected by inheritance tax. It ignores the fact that many of those estates will have had a spouse who shared their allowance. And for every one of those estates there are children and grandchildren who lose out.

This figure also ignores those who have had to pay for advice on how to give away their fortunes before they die to avoid the tax.

What’s more, it makes no sense to object to receiving a vast inheritance as “unfair” in the debate around the tax. Death duties have never stopped families helping each other on the property ladder. The “seven-year rule”, which means anything given away seven years before death is tax-free, is perhaps the most valuable exemption families are entitled to.

But there are many, many more death duty loopholes that the rich can take full advantage of to ensure their loved ones do not pay a penny. It means they pay a lower effective rate, while middle-class families with the vast majority of the wealth tied up in the family home are increasingly caught out.

It is often said that death duties are a tax on unearned wealth – especially property. But this overlooks the fact that many homeowners have paid vast amounts of interest to banks in the process of paying off their mortgages, severely limiting their disposable incomes. Besides, how we choose to spend or invest our money (and how successful we are at that) is no concern of the state.