Does anyone think that the Tory plans to increase inheritance tax are a good idea?

[morningpaper]

Just curious really.

Apparently the rate is actually £2 million for couples (e.g. 1 million each).

Particularly if the wealthy can pay £8k at retirement in order to ensure that they won't have to sell their house to fund any residential care (I do think that anyone who can easily do that is reasonably wealthy).

This means that more LIVING people will have to pay tax because we aren't taxing the dead anymore.

Why IS this such a popular idea? I don't understand.

[edam]

I think they are planning to cut inheritance tax, not increase it!

Agree it's a stupid idea. Obvious benefits for all those Old Etonians on the front bench, but am mystified why anyone outside the very, very few who will inherit £1m+ would think it was a runner.

Dh might benefit from the change re. inheriting from a parent who inherited from their spouse (although his mother's estate will be nowhere like £1m she does have a house and I think this new rule takes it out of inheritance tax entirely if I understand it correctly). But it's still unfair to everyone else - why should dh and his sister get free money they haven't earnt when everyone else has to pay tax every time they receive or spend money?

[morningpaper]

oooh think I missed out the word 'limit' but it wasn't very coherent was it?

I don't understand why it's seen as "a popular move"?

[wonderingwondering]

Because the money people accumulate during their lifetime has usually already been taxed. So people who save, or die young (like young parents) end up being taxed heavily, again, despite having paid tax when they earned the money. And if young parents die, why should the money for their childrens' upbringing be paid over in tax?

Most older people have used up their reserves/wealth by the time they die. There's a very small minority who end up paying IHT. And the seriously moneyed don't pay the tax, anyway, they donate a piece of art from their estate to the nation: and for conservation reasons it usually stays in the family pile with the rest of the collection.

Or the very wealthy have efficient tax planning so also avoid IHT.

In short, it is pretty arbitrary tax.

[EldonAve]

what wonderingwondering said

[WilfSell]

Oooh yes, increase inheritance tax! I'm all in favour of that.

[morningpaper]

I think it generates 1 billion a year - not really 'a small minority' of people

And this is on TOP of the 8k 'insurance' that OAPs can pay, so presumably the wealthiest will be able to pay that and leave a much larger estate

BUT what are you basically saying is that you think it IS ok to tax the living more rather than taxing the dead. Which is fair enough I suppose; I just find it a hard argument to understand.

[WilfSell]

Ah. See that pedantic point has already been made.

The policy is entirely intended to appeal to rich homeowners in the south east. Very few people beyond these boundaries, except perhaps a few enclaves in city centres and Cheshire etc will be affected.

[wonderingwondering]

I think the problem is that is hits the 'middlers' - the PAYE types who've paid tax all their lives, on everything they've earned or bought.

The super-rich don't pay it. So while the principal of taxing the dead might work, in practice it doesn't. And that is why there's resentment towards it, I think. And taxing the dead doesn't take in to account that there are often dependants left: disabled children, parents of young children. And those 'vulnerable' groups get hit the hardest.

[WilfSell]

Yeah. Middlers whose taxable inheritances are almost entirely the product of house price equity in the SE...

[midnightexpress]

I'm with you MP (I think. My brain is a bit addled). But I agree that cutting inheritance tax whilst presumably increasing other taxes/cutting help for those who cannot afford it in order to claw our way out of the financial mess we're in smacks very much of the Good Ole Days of Maggie and Co.

[BigGitDad]

Not so much of an issue now but it was a couple of years ago when the IHT levels were alot lower and they could not be carried over to the surviving spouse. certainly in London alot of people would have been caught up in it.
I think the labour party took the wind out of the conservative sales abit when they changed the IHT levels.
Insurance is more than £8k MP, where did you get that figure from? £8k a year maybe.

[wonderingwondering]

Maybe. But why should they be hit disproportionately harder than the 8th Earl of wherever, who will pay nothing, under the current system of cultural donations in lieu of IHT?

Tax capital gains in people's principal homes. Increase sales tax on luxury items. But any measure should apply to everyone who is deemed to warrant a higher level of taxation as they have 'more' than they 'need' - however defined.

[shonaspurtle]

Are there many parents of young children who leave an estate worth more than £600k? I'd have thought they would tend to be mortgaged to the hilt even if they lived in expensive homes in the SE.

[wonderingwondering]

I think MP is talking about the £8k contribution that people will pay at 60/65 and then be guaranteed free care on old age. They don't have to pay up front but can have a charge placed on their home so when they die/sell the house, the money gets paid then.

[wonderingwondering]

Shona, if you have death in service benefit for two working parents plus life insurance to pay off the mortgage the total amount could well exceed the current combined IHT threshold of around 700k.

[Ivykaty44]

the limits on inheritance tax

[Ivykaty44]

a great rate of interst the tax man gets aswell

[Earlybird]

my guess is that they are considering raising the threshold for inheritance tax liability because many more families now owe inheritance tax than previously.

This is due (I imagine) largely due to the skyrocketing price of property ownership that inflates the value of a person's estate dramatically.

The 'average' family who bought a house in not-very-swish Islington or Palmers Green (to give two examples) in the 1960's or 1970's could very well owe inheritance tax because the value of the property has increased many times over.

By raising the threshold, perhaps they keep the same general % of people paying the tax.

[morningpaper]

'The tax man' - well that is really the money that the country is RUN with innit?

[Ivykaty44]

wondering - death in service since when has this been taxed?

[scarletlilybug]

Dead people can't pay tax.... because they're dead. Inheritance tax is a tax on their beneficiaries... so it is indeed a tax on the living.

[wonderingwondering]

Death in service benefit is usually paid direct to the spouse, free of IHT - the example I'm thinking of is if both parents were to die, separately or at the same time, then the money would be taxed when it passed to the children, who could still be dependant.

My point is more to illustrate that IHT is arbitrary and can result in an unfair result. And the IHT limit I cited is the combined amount that spouses can pass tax free (so actually 2 x 325k, which is obv 650k).

[stressed2007]

"wondering - death in service since when has this been taxed?"

Always taxed unless it has been written in trust and then outside of the deceased's estate