Taxing inheritance isn’t just immoral. It’ll immiserate. Britain.
The situation is now being aggravated by the dire jobs market
Published 26 August 2026 7:11pm BST
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The British inheritance tax regime is now among the most punitive in the world Credit: iStockphoto
For as long as anyone can remember, there has been a quiet assumption in Whitehall: young people do not vote and pensioners do. Furthermore, as they are in work with rising incomes, it is acceptable to tax them to help those in retirement, who are towards the end of their lives and who may be in care or unwell.
The beneficiaries of this settlement have hitherto believed that they have done their bit, leaving them free to contemplate their health and what they can pass on to their spouses and their children, who they love. That last bit, the role of sentiment and affection and the duty that each generation owes the other, is not something you hear much of in the Treasury or in the halls of academia. Rather than judging a society by the value it creates over time, they are more interested in shorter-term issues like equality or the pronouncements of the Office for Budget Responsibility.
These assumptions are all now being tested to destruction.
It is no longer true that the younger generation is getting steadily richer, or at least not at the pace which their parents experienced. They must wait until their mid-30s to buy their house, 10 years later than two decades ago. The situation is worst for young graduates in the clutches of the usurious student loan system. Student loan interest payments are officially scored as taxes and as Ben Ansell, an Oxford academic, notes in a new report for the Left-leaning Institute for Public Policy Research, young graduates therefore pay much higher taxes than their grandparents.
It is no longer true that the younger generation is getting steadily richer Credit: iStockphoto
Someone over 65 with an income of £45,000, £70,000 or £105,000 faces marginal tax rates of 20, 40 and 60 per cent respectively. But a young graduate has to contend with marginal rates of 37, 51 and 71 per cent on the same income levels, once student loans and employee National Insurance are deducted.
The situation is now being aggravated by the dire jobs market. A recent survey found that vacancies for graduates plunged by 50 per cent in July compared to the same month a year ago. The unemployment rate for 16-24-year-olds has risen by around a half in the last five years to over 16 per cent.
Around the world, we are seeing rebellions by the young against the imbalanced inter-generational settlement. A recent political protest in India, initially over some messed up medical exams, was nicknamed the Cockroach Rebellion, after an unwise comment by a judge in court. I am with the cockroaches.
The situation is only going to deteriorate as the dependency ratio goes up from about a third of a pensioner for each worker to around half a pensioner in the next decade, due to the ageing population and declining birth rate.
What is to be done? Mr Ansell believes pensioners should pay a new 2 per cent National Insurance levy on their incomes. Stamp duty and Council Tax should be abolished and replaced by a 0.65 per cent levy on property. He has what he calls “Spiv Britain” in his sights, with a further levy on gambling, plus, in the future, taxes on Artificial Intelligence.
Nowhere does he mention inheritance tax which taxes, in most cases, assets which have already been taxed during a lifetime. While this is theoretically a tax on estates, this is arguably another tax on younger generations. Not only must they look after the elderly and fund much of their care, the capital they might be gifted when their parents pass away is eaten into significantly by the most joyful mourner at our funerals: the revenue officer. Increasingly, it is despised by everyone, of whatever age.
More from George Trefgarne
Rachel Reeves, characteristically, made matters even worse. She applied inheritance tax to unused pension pots, to business assets and to farmland. This is egregious. Family businesses and farms will have to be broken up to pay for it. As, in most cases, these are small and blameless enterprises, this is not only mean, it might end up causing more economic damage than benefit. It makes no sense, except on the grounds of class envy.
Those who come up with these sorts of schemes forget two things. First, the British economy is not a closed system. The ultimate sanction the citizen has over the state is to leave. And so the entrepreneurs and wealth creators are either departing, making arrangements to do so, or coming up with strategies to protect their legacies. The British inheritance tax regime, with its stingy allowances, is now among the most punitive in the world and people can shift to plenty of other more attractive jurisdictions. They do this not out of selfishness, but because they want to pass on their assets, their memories and their heirlooms to their children. The Cockroaches are on the march and the days for inheritance tax are numbered. DT.
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