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The "it's double taxation" argument seems to convince a lot of people but, for me, it fails basic logic at several levels. I just paid £10 for a taxi. The driver bought a chocolate bar. OMG quadruple taxation. I paid income tax. He paid income tax. He paid VAT. Shop pays corporation tax. Help!

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That is exactly right. If you are retired and have a £2m house and £2m investments, you will be living off your investments. If you have £30m of investments, you can give a very large £ to your kids and not change your quality of life.

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Yes, apologies. I should have mentioned that too!

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I'll take a proper look after the budget. But important to remember that Norwegian wealth is very different from wealth in the UK. (10% of the Norwegian rich list made their money from salmon farming. )

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Neil makes some points of detail on our report - some are fair, some are misunderstandings... we pick them up in the latest version. None move the headline numbers. Our report: buff.ly/OVR9hrU

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We'll be doing the same for other parties' tax proposals, particularly the bad ones. And we'll continue kicking the tyres on opaque paid-for reports from economic consulting firms. They always reach the desired result, never publish their models, and frequently make bad mistakes.

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And we reused the model we published three weeks ago showing that 20% of pensioner households were potentially affected by IHT buff.ly/nS0z6rG The Tories liked that one. But our response to their new proposal used the same model.

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I confess we cheated - we've looked into lots of possible tax changes and their consequences, so when we wanted to respond to this one, we just pulled stuff out of a box and polished it a bit.

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Second, Neil thinks we created our response to new Tory IHT policy overnight. It's 9,000 words, 9,492 lines of code and 40 footnotes. We have a good team of tax wonks, economists and coders, but we're not that good.

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So it would be good if Neil could amend the article to remove this point. OTOH there *is* a super easy, foolproof way to avoid inheritance tax, and that's to give your property to your kids more than 7 years before you die. THIS IS NOT LEGAL ADVICE

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The folk myth that trusts magically avoid tax has unfortunate consequences because there are unregulated firms out there misselling trusts as IHT "solutions" to elderly people. We investigated one here buff.ly/wvp0Ido

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Trusts were historically used for IHT avoidance. But today, volumes of legislation later, trusts are not a good tax planning move for most people. That's true for the very wealthy, and VERY true for normal people. These kinds of headline are bunk:

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First, and most importantly, it is not true that IHT is "trivially easy... to avoid. You simply set up a trust". Reality: set up a trust & there's an immediate 20% IHT lifetime charge. Then a 6% charge every ten years. A bit rubbish.

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Why it is right to cut it - and why the critics are wrong.

Worth reading this thoughtful piece by @neildotobrien.bsky.social (Neil O'Brien MP). Most of this is politics/values, but some of the detail isn't right. buff.ly/9x2WQM7

buff.ly

Cutting inheritance tax

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(The history is messier than the first tweet suggests because of the interaction with the bank levy, but that doesn't change the overall picture. We'll probably include a 20-paragraph footnote on this in our report. )

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Should we tax banks more, and how do bank taxes in the UK compare with other countries? We'll be publishing a report on this soon. If you want to read it first, you can subscribe to our free newsletter: buff.ly/WuxX3VE

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If the TUC thinks bank taxes should rise then it should be honest and make that argument. Inventing a fake history is a way to make sure nobody takes you seriously.

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More populist tosh from the TUC. There was no "tax break for the banks". The 8% bank surcharge was created to offset the corporation tax cut from 28% to 20%. So, when corporation tax then went up 5% to its current level, the surcharge went down 5%. Not a tax break.

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And if we look at people who are alive, rather than dead, c20% of pensioner households should rationally think about IHT: buff.ly/nS0z6rG

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"Only 4% of estates pay IHT" Misleading because there's no IHT when the first spouse dies. So the true figure is nearer 7%.

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"Inheritance tax is unpopular because the Tory press has scared people into thinking it will apply to them, when it usually won't" This is mostly not true. Most people think IHT is unfair even when informed how it works: buff.ly/rH0FyN7

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The evidence says otherwise. Please read our report.

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Did any of your cohort buy millions of pounds of woodland and agricultural property to avoid inheritance tax?

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Find some of the elderly people who bought £m of woodland to avoid inheritance tax, and ask them what they think.

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This does in fact seem obvious to everyone apart from the people who came up with the policy.

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You are a dangerous man. Our team hadn't even thought about artificial planning around expensive fixtures...

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And if you like tax policy, tax investigations or just long footnotes, then perhaps consider subscribing to our free newsletter: buff.ly/2GnDUMQ

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Our full report: buff.ly/OVR9hrU With full methodology, references and links to the modelling code

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If money is available for tax cuts, then they need to be targeted. Proper modelling, not vibes. And surely, given the position the UK is in, growth should be the priority.

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Here's our scoring of the growth impact of recently proposed tax cuts. The Conservative proposal is right at the bottom. Depressingly, all the tax cuts recently proposed by politicians are at the bottom of the chart.

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But if growth is the priority, we shouldn't be looking at IHT at all. Evidence suggests that cutting IHT boosts growth less than cutting other property/wealth taxes. There's evidence of negative effects (because heirs receiving inheritances have a reduced incentive to work).

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This is a bad IHT cut. For the same money we could increase the nil rate band to £900k/person, or alternatively cut the rate from 40% to 17.5%. Either would be simpler, fairer, and not distort the housing market.

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And there are other undesirable effects. The proposal could shift £60bn–£110bn from savings and investments into housing, and reduce the number of £1m-plus homes coming onto the market in London and the South East by 3%–6% each year.

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Take these effects into account, and the proposal won't cost the £6bn the Tories claim. We estimate £7.7bn–£10.9bn. (full working for this on our website)

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And they also didn't take account of the opposite effect. The proposal creates a massive incentive for people to shift cash from investments into a larger home.

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The Conservative proposal relies on modelling from Oxford Economics. For reasons that completely escape me, they didn't take account of this effect.

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Today, selling a £1m house and moving to a £400,000 flat won’t change your children’s IHT. The estate is the same size. Under the Tory proposal, the £1m house was exempt from IHT, but the £600,000 you released is fully subject to IHT. Your house move caused £240,000 IHT.

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Most tax changes cause taxpayers to change their behaviour in some way. Usually these effects are small. But here we should expect a substantial effect, because the proposal is economically equivalent to a 40% charge on an elderly person selling their house.

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Here's the Conservative proposal in full:

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A common complaint is that people on the Left ignore the dynamic effects of tax cuts. They just do a simple multiplication exercise and don't think about behavioural responses. That's often fair. But it's exactly the trap the Conservatives have fallen into here.

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Our full analysis, including detailed methodology and links to the modelling code: buff.ly/OVR9hrU (I don't believe any claims anyone makes about the cost/benefit of a tax policy if they don't set out their working in full.)

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Kemi Badenoch wants to exempt the family home from inheritance tax. But that creates a perverse incentive for elderly people to *upsize* to save IHT. That could double the cost of the policy, and push £100bn+ from savings into housing. A 🧵 on bad tax cuts.

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Our full analysis of the new Conservative policy will be out tomorrow. If you want to be the first to read it, you can join the 1% and subscribe to our free newsletter here. buff.ly/DZhmgt2

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All of this is from our inheritance tax model, which we published last month, showing that 20% of pensioner households have assets that potentially bring them within the tax: buff.ly/nS0z6rG

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3. And how does the wider economic benefit of this tax cut compare with other potential tax cuts costing the same?

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2. Where is the benefit concentrated?

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