IHT hit drives 72% tax take

Britain’s inheritance tax burden means that the Government takes as much as 72p from every pound earned in a person’s lifetime, according to new analysis. While IHT is typically charged at 40%, when income tax and National Insurance have already been paid, the effective marginal rate can be as high as 72%. The study shows that a business owner forced to pay IHT would lose £72 for every £100 earned, assuming they had also paid income tax, employers’ and employees’ National Insurance contributions and Class 4 NICs on the portion of cash that came into the inheritance tax net. A non-business-owner earning £60,000 a year would pay an effective tax rate of 56%, once income tax, NI and IHT are taken into account. John O’Connell of the TaxPayers’ Alliance has called for IHT to be axed, saying: "Every penny earned or spent is taxed, yet the Treasury still comes back for another dip into the pocket after someone dies."