New ‘death tax’ proposal will push silent majority to the limit - David Alexander

In his latest column for The Scotsman, David Alexander discusses how Scotland home ownership has become a major source of revenue for both local and national governments:

We are charged more to buy a property, more to live in it, and it is being proposed that more tax is taken when we die. In other words, we are being penalised to buy a house, live in it, and may be charged when we sell it if we leave an estate worth more than £36,000.

You could be forgiven for thinking that home ownership was a terrible thing. The argument is that those with the broadest shoulders should pay the highest taxes. The definition of the broadest shoulders is now not at a level many people would agree with.

Taxation on buying a property is higher in Scotland for first-time buyers (FTBs) with no payment due in England and Wales on the first £625,000 whereas in Scotland they pay from £175,000.

For non-FTBs the higher rate begins at £325,000 which is the average price for a house in Edinburgh. Once you own your house if it is in band E or above (which is parts of Scotland can be a property costing £190,000 depending on its age) then you too are regarded as rich and worthy of higher taxes through enormous increases in council tax.

When you die there is now a proposal to introduce a local inheritance tax (winningly called ‘a death tax’) which will start on all estates valued at £36,000 to £325,000 (which is the level that UK Government IHT kicks in) and will be charged at 20 per cent.

So, people who have accumulated £36,000 through a lifetime of work, pensions, and home ownership (and the bulk of most estates is contained in an individuals’ property) will be regarded as fair game to target for punitive government taxation.

All of this at a time when the government states that it wants to work closely with business to encourage a growing, entrepreneurial economy. Never mind attracting entrepreneurs these policies will struggle to attract anyone to Scotland.

If someone with a house worth £190,000 – which will encompass people from all walks of life and include many in the workforce who are often cited as those the government seeks to protect – is easy prey for higher taxes then perhaps we need a bit of honesty and a clear statement that if you want to live in Scotland you must personally be willing to pay a lot more to do so.

These policies seem to exist as a disincentive to home ownership, would almost certainly lead to a wealth drain out of Scotland, and directly punish saving. Why would you agree to lose 20 per cent of your £36,000+ estate when a simple journey south of the border would save you a fortune?

IHT nationally is already an iniquitous tax unfairly punishing thrift, enterprise, and work but if a lower starting level were introduced in Scotland, then this would be an attack on any accumulation of wealth.

Rewarding work, savings, home ownership, and wealth creation should be encouraged, praised, and held as a worthwhile way of living. These tax threats increasingly smack of desperate attempts to raise money from anywhere in a bid to plug a very deep financial hole.

The death tax proposal was put forward by several anti-poverty organisations and they used the phrase “putting Scotland’s money where his [Humza Yousaf’s] mouth is.” But this is not Scotland’s money it is individual’s money accumulated over a lifetime of work, saving, investment and thrift. It is not there to simply be plundered on a whim without considering the individual circumstances in which a person finds themselves.

There will be a lot of older, possibly bereaved people affected by this with houses they have lived in all their lives, pensions they have accumulated through a lifetime of work, and assets acquired from decades of living.

All, apparently, legitimate sources of income and all to be targeted. I suspect that this latest idea is one that that will have the silent majority suddenly finding their voice and raising their concerns that this is a step too far.