Why Inheritance Tax Punishes Social Mobility

Inheritance tax is often sold as a way to redistribute wealth and create a fairer society. But the truth is, it punishes those who work hard, build something for their families, and aspire for a better life. For the vast majority of people affected, inheritance tax isn't about the super-rich; it’s about those who’ve climbed the social ladder and are being penalised for their success.

The Double Tax Trap

Let’s start with the basics: inheritance tax is a tax on assets that have already been taxed. Families pay income tax, capital gains tax, and all sorts of other taxes during their lives. They save, invest, and work hard to secure their future and provide for the next generation. When they die, their children are then hit with a tax bill on the money or assets left behind—wealth that’s already been taxed multiple times. It’s a double punishment, and it makes no sense for a government that claims to support social mobility.

Inheritance Tax and Social Mobility

The majority of those affected by inheritance tax are not the ultra-wealthy. In fact, studies show that roughly 80% of millionaires are first-generation millionaires. They’ve built their wealth through hard work, smart investments, and a lifetime of effort. Inheritance tax punishes them and their families by stripping away what they’ve managed to achieve.

Imagine this: someone works their entire life to move up the social ladder. They start out poor, study, get a degree and a good job, buy a home, save money, and build a business. They succeed, changing the trajectory of their family’s future. But when they pass away, their children are forced to sell the house or business just to pay the tax bill. Instead of their efforts lifting the next generation higher, inheritance tax drags them right back down. It’s the politics of envy, and it discourages people from striving for better.

A System That Disincentivises Hard Work

The message inheritance tax sends is clear: don’t work too hard, don’t try to achieve too much, because the more you build, the more we’ll take. For those in working-class or middle-class backgrounds who manage to accumulate wealth, it’s a slap in the face. And for those looking up, hoping to achieve the same, it’s a deterrent. Why bother building something when the state will take it away?

Punishing the Aspirational

People who are most affected by inheritance tax are those who have managed to climb the ladder but are not yet in the stratosphere of wealth. They are the ones who built a business, invested in property, or saved diligently to secure a better future. These people are the backbone of social mobility, but they are also the ones who suffer most. The wealthy elites, on the other hand, have the resources to navigate the system with trusts, loopholes, and offshore arrangements.

Inheritance tax doesn't touch them in the same way. Instead, it falls on those who don’t have access to expensive financial planning but have still worked hard to achieve a level of comfort and security. By punishing these people, the government is essentially saying that social mobility is only acceptable up to a point.

A Policy That Hinders Growth

Inheritance tax doesn’t just affect families; it also affects the wider economy. When people are forced to sell businesses or assets to pay the tax, it reduces the potential for growth. Businesses that could have been passed down and expanded are sold off, often broken up, or absorbed by larger corporations. The innovation, jobs, and economic activity that could have come from family-owned enterprises are lost.

And when families have to sell homes, it not only disrupts their financial stability but also affects the housing market, driving prices even higher and making it more difficult for the next generation to get on the ladder.