Wealth and inheritance – from 1896 to now

Inherited wealth has started to increase as a percentage of national income since the 1970s, reversing the long-term decline going back at least as far as the nineteenth century, according to a new paper from the LSE's Centre for Analysis of Social Exclusion.

The paper, by Professor Tony Atkinson, looks at the transmission of wealth in the form of estates and, insofar as it is possible, lifetime gifts – starting from 1896, when the modern estate duty was introduced.

Key findings

  • Before the First World War, total transmitted wealth represented some 20 per cent of national income. This gradually fell to around 10 per cent after the Second World War, eventually dipping below 5 per cent in the late 1970s.
  • Since then, the long-term trend has been reversed, with a rise from 4.8 per cent in 1977 to 8.2 per cent in 2006.
  • Personal wealth has grown since the 1970s about twice as fast in real terms as national income.
  • Until the Second World War a UK citizen was, statistically, more likely to pay estate duty at death than to pay income tax while living. But today that situation has been completely reversed: income tax is paid by a large majority of the population, whereas the percentage liable for inheritance tax has fallen below 10 per cent.

Source: Tony Atkinson, Wealth and Inheritance in Britain from 1896 to the Present, CASEpaper 178, Centre for Analysis of Social Exclusion (London School of Economics)

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