We don't gamble in the private wealth department, especially on something as capricious (in recent times at least) as Conservative tax policy. But if we were gamblers, my money would very much be on 'no'.
It is worth unpacking this though. There has been a lot of noise recently around imminent inheritance tax (IHT) cuts or potentially even abolishment. There has been so much noise in fact (see here and here and here for some of the many recent articles) that it is difficult to imagine that Whitehall is not giving this serious consideration.
Conventional thinking in the trade for years now has been that any cut to IHT would be a very hot political potato. Indeed, conventional thinking is that the current IHT regime is relatively benevolent (historically speaking) and, if anything, the reliefs are likely to be tightened up to produce a greater tax take.
As the Government's own statistics make clear, less than 4% of estates pay IHT. The Institute for Fiscal Studies has also set out its view that the wealthiest 1% of the population would see more than 50% of the benefits of any cut. We are therefore looking at a tax that is very much the preserve of the wealthy and, on occasion, the poorly advised. That rules any left leaning party out from downwards tinkering (or does it - see below). But what about the Conservatives, typically viewed as the party of, and for, the wealthy?
Firstly, I think that moniker, especially in the more recent times of small 'c' conservatism, is relatively unfair. It was the current Conservative government, after all, that introduced higher rates of stamp duty for second homeowners, the ATED charge targetting Oligarchs who shelter their Belgravia mansions in offshore companies, as well as abolishing buy-to-let mortgage interest deductions for higher rate taxpayers. They also introduced a whole raft of anti-avoidance and anti-evasion legislation targeting both individuals and corporations alike (see here for the Guardian's take). Indeed, for a while George Osbourne was the only chancellor in Europe proposing legislation to target corporate tax dodgers at a time when the tax arrangements of Google and Amazon were being viewed with some suspicion.
Still, if someone is cutting IHT, it's going to be the Conservatives. But would they really do this given the clear danger of alienating 96% of the population? It does seem a little odd, so why all the noise?
As the FT rightly points out, there might be structural reasons why this tax cut makes sense. Inflation has caused real pain in recent times, and there may be something to say for a tax policy that puts funds back into general circulation without risking inflation. However, this is open for debate and, moreover, seems a clear vote loser. One thing that is not often mentioned, but we do see regularly in practice, is the misconception many people hold that they will actually have to pay IHT when, in reality, their estates are well within the available allowances. Still, it does seem quite bold to play for votes based on voter misapprehension.
Nevertheless, it does seem that the Conservatives believe, somehow, that this will win votes. Certainly, this could play well in the South, where many 'normal folk' end up paying IHT by the cunning wealth generation trick of buying a non-descript house many decades ago. Even then though, people living in relatively affluent areas often vote Conservative anyway. When they don't (the eagle eyed may spot the picture of Oxford above), putting more money in the hands of voters has historically made no difference to their ideological voting stance.
To some extent, this also seems to be a needless own goal. For years now, the Conservative Government has effectively increased IHT in a way that the previous Labour government never did by simply freezing the IHT nil rate band (yes, they did muddy the waters here when they introduced the RNRB in 2016 but that is the subject for many other blogs). Did the Conservatives get any recognition for targeting the wealthiest in this way? No, of course not. Prior to 2009, this tax-free allowance rose every tax year, often ahead of inflation. Did the Labour government take any flak for benefiting the wealthy in this way? No, of course not.
This perfectly demonstrates the political minefield that is IHT. Because it is conceived of, at an ingrained level, as a tax on the rich, pragmatic policy often gives way to Real Politik. I am no politician and am certainly intrigued to know whose vote the Conservatives think this will sway. Unless they can see something that the rest of us can't though, this idea seems destined for the political scrap heap.
If you would like to discuss your own IHT issues or estate planning in general, please do not hesitate to contact the author, or any member of our Wealth Management and Taxation Team.