Abolishing inheritance tax would be a 'win-win', says former Tory minsiter

12 March 2024 , 09:52

448     0

MP Ranil Jayawardena says abolishing inheritance would boost the economy (Image: PA Archive/PA Images)

Scrapping inheritance tax would boost the economy, a Conservative former minister has said.

During a debate about the budget, Ranil Jayawardena, MP North East Hampshire, highlighted how Sweden's decision to scrap inheritance tax led to more tax money being collected. He said that abolishing inheritance tax would be a "win-win".

In the UK, the standard inheritance tax is 40% for estates valued over £325,000; this tax is only paid on the value of the estate above this level. If an estate is worth less than £325,000, no inheritance tax is due.

HMRC stats showed that less than 4% of all UK deaths in the 2020/21 period resulted in paying inheritance tax, collecting £5.76 billion in tax for that year. There are certain exceptions to inheritance tax, including transfers between partners whether married or in a civil partnership.

Mr Jayawardena made a case before the Commons saying: "Abolishing inheritance tax will grow the economy, it would encourage more people to stay and work for longer and it will boost receipts to the Exchequer, and the proof of this is Sweden. Sweden's inheritance tax has raised roughly the same proportion as it does in this country, less than 1% of all revenue to the Treasury."

Teachers, civil servants and train drivers walk out in biggest strike in decade

He added: "They abolished inheritance tax in 2004, a move that enjoyed cross-party support, and the result was booming entrepreneurship, economic growth and tax revenues that that tax had previously suppressed. It created a surge in assets actually being transferred, not just between family members but to external owners.

"It was invested in business, capital was being used for innovative reasons and productive uses, and family businesses became more entrepreneurial too, so it was a win-win. So, contrary to some briefing that there was from the Treasury ahead of this budget, by abolishing inheritance tax, or at least cutting it significantly, the overall tax revenues can go up and the proof is there. And, of course, any action on inheritance tax is non-inflationary which makes it a safe choice as we continue to battle inflation."

Labour MP Ian Byrne (Liverpool, West Derby) argued that the majority of people would prefer to see taxes increased in order to fund greater public spending. He said: "Polling by Ipsos shows that 55% would rather tax more and increase public spending, only 10% of people want to reduce taxes and spend less on public services, so I ask again who is this budget really for? ".

He added: "Spending increases for healthcare and education don't come close to what is needed for our public services after the challenges of Covid-19 and 14 years of brutal austerity."

Lawrence Matheson