Title page
Contents
ACKNOWLEDGEMENTS 4
EXECUTIVE SUMMARY 6
INTRODUCTION 12
SECTION 1. THE STATE OF INHERITANCE TAX TODAY 13
CURRENT DESIGN 13
THE UK IN INTERNATIONAL CONTEXT 19
SOURCES OF PUBLIC CONCERN 26
CONCLUSION 29
SECTION 2. OPTIONS FOR REFORM 30
1. SHIFTS TO THE PARAMETERS OF THE CURRENT REGIME 30
2. OVERHAULING THE TAX BASE 44
3. HYPOTHECATION 57
CONCLUSION 61
TABLE 1. COMPARISON OF UK SYSTEM TO REFORM PROPOSALS AND INTERNATIONAL SYSTEMS 8
FIGURE 1. Almost four times as much business relief was claimed on unlisted shares in 2020/21 than 15 years before 17
FIGURE 2. The UK taxes a much lower percentage of inheritances than selected comparison countries 20
FIGURE 3. Compared to other countries, the UK has a high threshold relative to average earnings, but also a high rate 20
FIGURE 4. The UK has a relatively high inheritance tax rate for children 21
FIGURE 5. A minority of OECD countries offer full inheritance tax exemptions for owned businesses, farms, private pensions, but the UK generally offers it for all 22
FIGURE 6. The UK's inheritance tax delivers just 0.7% of all tax revenue. While this is higher than most OECD countries, it is half as much as some 23
FIGURE 7. The UK raised less revenue from inheritance tax in 2022 than the US, Japan, France and Germany 24
FIGURE 8. The UK has a higher effective inheritance tax rate than comparison countries across most of the distribution of taxpaying estates but the UK has... 24
FIGURE 9. Capping business relief and including pensions in inheritance tax would double the average rate for estates over £5m, but leave rates for other estates... 31
FIGURE 10. Effective inheritance tax rates are higher and more progressive in South Korea than the UK for the most valuable estates 37
FIGURE 11. Effective inheritance tax rates rise much higher in Japan than the UK, and don't fall until inheritances are over £46m 40
FIGURE 12. France's inheritance tax is progressive even within the top 0.5% 43
FIGURE 13. The German inheritance tax system is regressive, but has become more progressive for high-value estates over time 46
FIGURE 14. Spain has a progressive inheritance tax, with the rates increasing for wealthier recipients 50
FIGURE 15. For additional properties, if CGT was applied at death rather than inheritance tax, more tax would be charged in most instances 55
FIGURE 16. For additional properties, if adopting CGT rates proposed by the Resolution Foundation and applying it at death rather than inheritance tax, more tax... 56