FINANCE
Paul Lewis
INHERITANCE TAX / MONEY NEWS
Although it applies to just 5% of deaths each year, Inheritance Tax is a divisive subject. If you’re worried about loved ones being left with a bill, paying into a pension could lessen the burden, as our columnist explains
illustration ELIOT WYATT
People hate Inheritance Tax (IHT). Some criticise it for being double taxation: we worked hard to earn our money, which was taxed, and then when we die, what we have saved or invested – or the home we have bought to live in – is taxed again.
In my view there are two things wrong with that argument. First, there is no law against double taxation, it happens every day. You get £100 income from earnings or a pension. That has already had tax taken off it – you need to earn £125 to have £100 left after income tax of 20%. Then you go to a shop and buy a pair of trousers or a dress that costs £100. But £16.67 of that price is passed to the Chancellor in VAT*– it’s double taxation.