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Oh what a surprise - Tories say inheritance tax unfair

(107 Posts)
WendyWeber Fri 17-Aug-07 00:08:39

BBC

What do they mean, <<estates of those "who could not in any sense be described as rich" are now above the £285,000 payment threshold>> ???

They are a damn sight richer than those who own no property and have no estate at all

hunkermunker Fri 17-Aug-07 00:12:37

I hate to make this all about the London again...so I'll stop right here!

WendyWeber Fri 17-Aug-07 00:16:19

Whaddya mean, hunker?

Niecie Fri 17-Aug-07 00:18:08

Hello WendyWeber

Depends what you call rich. In the South East it could easily be the case that somebody is living in a house that has appreciated in value over a large number of years. They may have no other assets other than the house which isn't by any stretch of the imagination a palace and yet their family have to stump up inheritance tax when they have no cash or assets either.

Obviously there are people who would be very grateful to have the problem of having to pay inheritance tax but that doesn't make it fair that the threshold has hardly changed for years.

hunkermunker Fri 17-Aug-07 00:21:45

Lots of people who bought houses in London suburbs for half a crown back in the 1930s and are v elderly now live on state pensions and yes, their house might be worth money, but if they sell it they'll have to move miles away from family and other supoprt networks like familiar churches, etc, plus leaving memories of family home.

Niecie Fri 17-Aug-07 00:24:34

The point is hunkermunker, that the problem is not just restricted to London any more. There are loads of places where the average house price is close the inheritance tax threshold. That is why it is a problem, isn't it.

WendyWeber Fri 17-Aug-07 00:26:56

Yes, but if they sell their own house it's not an inheritance tax issue. If it is an inheritance tax issue then the person concerned has died, and it just means their descendants inherit less - the tax comes out of the estate.

I honestly don't see the problem.

TheDuchessOfNorksBride Fri 17-Aug-07 00:29:30

Why should people pay tax on their life-earnings twice though?

London v. Leeds. Geographically it is unfair.

WendyWeber Fri 17-Aug-07 00:30:07

In what sense is house-price inflation life earnings though?

hunkermunker Fri 17-Aug-07 00:30:10

Yes, I think you're right - inheritance tax was originally intended for the frantically wealthy, I thought, and now it seems it's like A-level results - even being frantically wealthy is dumbing down!

Niecie Fri 17-Aug-07 00:30:37

But where would they get the money to pay the tax. 40% of £285k is £114k (I think, I don't have a calculator to hand). You can't have the assets in the estate until you pay the tax so how are most people going to find that sort of money?

WendyWeber Fri 17-Aug-07 00:31:28

You have to pay the tax before you can sell the house?

hunkermunker Fri 17-Aug-07 00:32:36

Yes, they can move. But my point is that often elderly people won't want to move, for all sorts of practical and sentimental reasons.

It's not as easy as "well, move house if you're worried about it".

TheDuchessOfNorksBride Fri 17-Aug-07 00:33:28

So people should be taxed on property inflation? I think not. Nobody gets a tax rebate when the market crashes.

Niecie Fri 17-Aug-07 00:34:47

'Fraid you do have to stump up the money first. You were able to put in place some sort of trust to ensure that the money was available upfront but dear old Gordon Brown has stamped on them and they are no more.

hunkermunker Fri 17-Aug-07 00:36:02

Don't you only pay 40% above £285,000?

WendyWeber Fri 17-Aug-07 00:36:16

Table of thresholds here

They have moved up quite steadily in fact

Niecie Fri 17-Aug-07 00:36:56

yep, all inheritance tax is charged at 40%

hunkermunker Fri 17-Aug-07 00:37:02

Interesting article here

WendyWeber Fri 17-Aug-07 00:37:12

Nobody is taxed on property inflation - people are taxed on inheritance based on property inflation - different thing altogether.

Niecie Fri 17-Aug-07 00:37:54

The thresholds may have increased but nowhere near the rate of house price inflation.

WendyWeber Fri 17-Aug-07 00:38:16

So what happens if you have an estate owing inheritance tax and the recipient can't pay the tax before the house is sold?

hunkermunker Fri 17-Aug-07 00:39:38

"WHEN Labour came to power in 1997, the inheritance tax threshold stood at £200,000. Today, it is £285,000, an increase of 42.5%. But over the same period, house prices have risen on average by 140%. Millions more households are now caught in the IHT net."

First paragraph of that article I just linked to.

hunkermunker Fri 17-Aug-07 00:40:51

And also, the tax isn't hitting the people for whom it was originally intended, because they make very sure their estates are IHT-proof through careful planning.

WendyWeber Fri 17-Aug-07 00:43:01

The "average house price" in the UK is still way below the inheritance tax threshold though and I bet the relationship hasn't changed that much since 1988 when the table I linked to was published.

It may hit harder in the SE but then people in the SE who already own property have benefited more from price inflation. You can't have it both ways...

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