A “citizen’s inheritance” could see Brits become £10,000 richer when they reach the age of 25 as part of a suggested measure to bridge the generational divide, and it could be used to help some youngsters buy a home.
A number of measures have been put forward by think tank the Resolution Foundation as a possible solution towards creating a more level playing field for today’s younger generations, with changes being made to other taxes in order to fund a proposal to give £10,000 to everyone when they reach the age of 25.
The money would have to be spent on either a deposit for a property, rental deposits, education or training, pension investments or start-up costs for a new business, says the think tank, with the cash coming from the replacement of inheritance tax with a “lifetime receipts tax”.
The new tax would incorporate lower rates and fewer exemptions, with everyone getting a lifetime tax receipts allowance of £125,000 (increasing with inflation). Anything received above this amount through gifts or inheritances would be taxed, although this would be much lower than current inheritance tax rates. Up to the value of £500,000, receipts would be taxed at 20%, rising to 30% for receipts over £500,000, while currently any inheritance from an individual estate over £325,000 is taxed at 40%.
Is a £10,000 gift really the answer?
Outside London, the £10,000 lump sum could pay for up to half a deposit on a home for a first-time buyer, which could make a huge difference to young people wanting to get onto the property ladder, while those that prefer to continue renting could use the money to pay for their monthly accommodation costs while enabling them to save for a deposit.
However, the proposals have been criticised by some who believe they will not help many youngsters, and think there are other, better measures that could be more effective.
“Instead [of the £10,000], young people need a very small number of simple reforms that encourage them to accrue assets and increase their chances of doing so,” says City AM’s Julian Harris. “The pension system must be stable and easily-comprehensible, for example, with former minister Steve Webb’s plans a great place to start.
“Income taxes should be lower, giving 20-somethings the greatest opportunity to save for a deposit for a home. NI could be scrapped up until the age of 30, for example.”
Harris adds: “And most importantly, planning liberalisation, allowing the construction of more houses in high-demand areas, could yet again make homeownership a realistic goal for millions of workers who remain frozen out despite the recent price slump.”
