Why the UK Is So Weird About Inheritance Tax

A DINKWAC’s view of a national panic, imagined confiscations, and the uncomfortable truth about wealth, fear and being dead.

There are many things in life that we in the United Kingdom can get… worked up about.

The weather, being the most obvious example. Trains. Bins. Strictly. Whether someone being vegan is a personality trait or a cry for help¹.

Beyond this very select few examples though, there’s one subject that comes up pretty regularly, and with a vein-popping intensity that feels wildly out of proportion to the reality of the actual subject - a subject that manages to pretty reliably turn otherwise calm, rational adults into trembling guardians of fortunes they do not yet possess, may never possess and are flat out convinced that the state is about to get their grubby little mugs all over.

That subject is, of course, inheritance tax².

Photo by Greg Willson on Unsplash

As a caveat to this piece, yes I do come at this subject from a slightly unusual, if not rare, vantage point, as I’m part of what the interwebs, with all the subtlety we know and love a DINKWAC - translated directly into: dual income, no kids, with a cat³.

I do not have children. Nor are there any plans for children. Additionally, there is also no major backstory to explain the lack of progeny - my husband and I simply… opted out. And we’re fine with that. We like our lives. We like our work. We like that we can travel whenever we want, be flexible with our time and that we are allowed sleep⁴. Children, to both of us, are fine - if a little sticky and slightly noisy - but they just weren’t for us.

Which means that when the national conversation pivots towards the now familiar gnashing of teeth and clutching of pearls about inheritance tax and “hard-working families” I sometimes feel like I’m watching it from the sidelines through a thick layer of glass. I’m by no means offended by the conversation, I’m just slightly baffled by the hysteria that sometimes goes hand-in-hand with it, and I’m especially bemused by the tone of the conversations that seem to suggest that Rachel Reeves plans to personally arrive at your nan’s memorial service, clipboard in hand, to value her trousseau chest and ask a few probing questions about the good silver and the Royal Doulton tea set⁵.

As ever, context is needed, so let’s do that boring bit and set up a hypothetical that will serve as a frame for this post.

Say I shuffle off this mortal coil with an estate worth around £500k⁶. It’s not a country pile, nor a hedge fund fantasy - just a fairly standard London flat, a few bits of savings and a worryingly large collection of Lego. In the UK, inheritance tax only applies above the nil-rate band, currently sitting at £325k, with everything below that passing completely untouched by His Majesty’s Revenue and Customs.

The remaining £175k out of the money left behind is taxed at 40%, which in this case, translates to roughly £70k.

This basically means that whoever is lucky enough to inherit from me - a godchild, nephew, niece, close friend or, for the sake of levity, a grateful pool boy⁷ - still walks away from my demise with £430k.

Four hundred and thirty thousand Great British Stirlings⁸.

This is money, I remind you, that the lucky beneficiary did not have the day before. It is an amount that could very conceivably go a large distance towards buying a home, wipe out debts, provide a decent amount of long-term security or simply make life a little bit less terrifying.

Even after the much-feared and maligned application of inheritance taxation, that amount remains a life-altering sum - and yet, we still discuss inheritance tax in rhetoric that describes it as a posthumous mugging instead of a levy on wealth that, by its very definition, is surplus to the needs of the person who earned it.

Beyond the fiscal reality of this though, there sits another layer that I worry people genuinely miss - if, and when, my inheritance becomes a reality for whomever it is destined, what happens to it, taxed or otherwise, will not affect me. At all. Not even a little bit.

Because, very crucially, I will be… well, dead⁹. Caput. Weg.

The idea that we need to consider contorting the entire tax system around my posthumous preferences strikes me as a slightly odd priority, taking into consideration that I will in no way or form be in a position to experience either the injustice or the relief.

Should we consider then that perhaps the conversation isn’t really about inheritance tax as such?

Of course. Because it is about more than whether you need to pay tax on money left to you - it’s about a low-level anxiety of living in a modern country that just isn’t doing that well.

Looking at the wider determinants in society, wages have barely moved in years. Housing has become near completely unattainable for vast numbers of the population, and, pretty crucially wealth is now more determined by assets than it is by income, by what you already own instead of what you’ve earned. When you start adding these points into the conversation, inheritance does start feeling less like a windfall or bonus, and more like a potential survival plan. It stops being a cherry on top of the cake of life, and turns into the last lifeboat.

So when you, as many people do, become to an extent dependent on the funds that may be paid out on a loved one’s death, inheritance tax does stop feeling like redistribution and it starts feeling like yet another hurdle to jump over.

That fear, I find completely understandable - but it still doesn’t make the argument against inheritance tax sound.

The final layer of the conversation, and the one that doesn’t seem to be acknowledged very often by those shouting loudest about inheritance tax needing to be axed is that they’re leading a conversation that isn’t about protecting families at all - it’s about protecting inequality without having to name it. About defending the right for advantage to compound generation after generation without interruption while telling the rest of the country a lovely story about effort, merit and deservingness.

Because the thing to always keep in mind, in between all the caveats that I myself have introduced into the conversation, and all the dire warnings about inheritance tax being immoral, is that it will not affect very many people. As it stands, fewer than 1 in 20 estates in the UK paid inheritance tax in 2024. This is not a widespread problem. Most of us, when we’re either the inheritor or inheritee will just not be affected by this issue.

This all brings me to a slightly uncomfortable conclusion - that in inheritance tax, like so many other subjects, has become a sort of proxy battle for something that is much larger than itself. It’s become a way of expressing our feelings about fear, decline and insecurity in a country that now serves these up in spades without ever explicitly naming them.

It is a far easier thing to imagine a faceless bureaucrat with an HMRC lanyard rifling through your nan’s sideboard for the bits and pieces that may fetch a decent price than it is to openly confront the fact that we now find ourselves living in a country in which hard work is no longer a reliable route to stability, and where your personal future depends in a large part on who you happen to be related to.

I will also add that my view isn’t universal, nor do I expect it to be - if you have children, I fully acknowledge that the emotional calculus related to what happens to your investment is very different to mine, and the instinct to protect what you’ve built for them through your own efforts is both entirely human and eminently understandable.

But even with that admission, I still think it’s fair of us all to ask whether a society that treats inherited wealth and assets as sacrosanct, while at the same time accepting widespread stagnation, precarity and declining services as inevitable has its priorities quite in order.

At some point the question isn’t whether or not inheritance tax feels fair to us individually, but the role it has to play in stopping inherited advantage from pooling in exactly the same place that it always as.

Asking for what really turns out to be a modest share (14% in my particular scenario) to return to the society that supported me through my life doesn’t feel particularly radical or controversial - it feels reciprocal.

And if the price of living in a country with functioning infrastructure means that my hypothetical pool boy inherits £430k instead of £500k, I suspect he’ll cope - and I, being dead, certainly will not have terribly much to add to the subject.

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1. It is neither. I promise you.

2. AKA: Death Tax to anyone who tries to make it sound like a crime being committed instead of an accounting.

3. To note, the Fur Daemon contributes zero financially, and shows the same amount of remorse about this.

4. This particular benefit remains completely theoretical in my case and is mostly squandered playing Civilisation VII, thinking or worrying about bin day.

5. In a certain scenario in this fantasy, I imagine she’s wearing sensible shoes and asking about antique teaspoons.

6. Caveat: there is more complexity to this in the form of whether a family home is left to a child and whether you’re married to your partner or not, but for the sake of this piece, we’re going to stick to a reasonably straightforward example.

7. There is, of course, no pool - this option is purely for narrative balance and light homosexual whimsy. I don’t make the rules.

8. Please imagine me whispering this dramatically.

9. I strongly encourage readers to not overthink this as death is, in most cases, quite final.