By Guy Brandon, 13 April 2015
To continue our series on election pledges, this blog takes a look at the Conservatives’ promise to end inheritance tax on homes worth up to £1 million. How can the Bible inform our response to this?
The Conservatives have promised to end inheritance tax (IHT) on homes worth less than £1 million. Since the average house price in the UK is £272,000, it’s a plan that will naturally benefit higher earners rather than those struggling to pay the mortgage, or those renting a property. Inheritance tax is currently charged on estates worth more than £325,000, though a transferrable allowance means this rises to £650,000 for married couples.
It’s a policy that seems to belong to the ‘party of the rich’ criticism often fired at the Conservatives. It also risks pushing up house prices even more, because there is less long-term risk to investing in housing – further increasing inequality. The policy will cost around £1 billion, to be paid for by reducing tax relief on pension contributions on incomes between £150,000 and £210,000, from £40,000 to £10,000.
Only a small number of people will be affected by the policy, leading to criticism that it is the wrong priority. David Cameron explained the reasons behind the decision in a speech. ‘That wish to pass something on is about the most basic, human and natural instinct there is. And that’s why for a long, long time I have wanted to act on inheritance... We will take the family home out of inheritance tax. That home that you have worked and saved for belongs to you and your family. You should be able to pass it onto your children. And with the Conservatives, the tax man will not get his hands on it.’
The biblical ideal is for every extended family to have a plot of land which would be passed on to future generations. Leviticus 25 explains that this property could not be bought and sold permanently, but only on a leasehold basis, so that every 50 years it would be returned to its original family. In this way, every family had some means of financial independence, reducing poverty and inequality.
Inheritance tax takes a bite out of the estate that is to be passed on, meaning that houses often have to be sold to pay the bill. In turn, this weakens an extended family’s roots in a local area. The Jubilee laws in Leviticus 25 were designed to maintain the cohesion of the family and community, ensuring that families weren’t forced to move in times of hardship. Eliminating inheritance tax has a similar effect, allowing properties to stay in the same family over generations.
Back to priorities
In general, then, cutting inheritance tax is a positive move that has the potential to strengthen families and communities. It encourages a more relational, less individualistic view of property: that a home belongs to a family, and that a tax on the value of this should not be paid simply because one of the members of that family has the misfortune to die.
However, this insight must be considered in the context of wider priorities. In a perfect world, everyone would have their own property and no one would pay inheritance tax. But there are already too many inequalities and injustices. Lots of families do not own a home at all, let alone one worth £1 million. Policies that make housing more accessible to everyone should be a first step towards changing that. Cutting inheritance tax (even for top earners) is a laudable aim, but one that might take place several steps further down the road when those basic inequalities have been addressed.