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Should inheritance tax be abolished?

Inheritance tax is one of the most controversial of the UK taxes yet it only collect a minimal amount of money and affects a tiny minority of the UK population. While the amount of people affected by inheritance tax has grown as the property market blossomed, with inheritance tax allowances rising by less than the growth in property prices, it is still a very expensive tax to collect and one which is very inefficient.

There have been various calls over the last few years for inheritance tax to be abolished with the Conservative government the more likely of the political parties to do so. However, it is effectively seen as a tax on the rich and ultimately the Labour Party would appear to be unlikely to abolish inheritance tax in the short to medium term. However, as mentioned above, inheritance tax costs an awful lot of money to administer and brings in a minimal amount (less than 1% of the UK population will be impacted by inheritance tax in any one year).

If inheritance tax were to be abolished this could have an impact upon the financial services industry, much of which is built around avoiding taxes such as inheritance tax via an array of legal means, using the current regulation. In the short to medium term it looks as though inheritance tax is here to stay but in the longer term it is a tax which is difficult to justify.

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