Inheritance Tax

I cannot speak for plenty other countries but the country I am from (Asia) does not levy any IHT or Capital Gains tax on any asset whatsoever. This encourages wealth creation because you keep what you save/accumulate, rather than relying on benefits.

Not if you happen to be a divorced homeowner who has the misfortune of an early death after the second half of 2027. Their defined contribution pension will be added to the estate for IHT purposes.

Nor is it worth holding onto a sum just in case you need to pay for residential care. If prudence and financial sacrifice is to be taxed at 64% you might want to blow the lot.

It is a fallacy that inheritance tax will close the gap between those who inherit and those who don't. Unless a person is close the death right now, inheritance tax can be planned around and is eminently avoidable.

What this current government has done is accelerate the Great Wealth Transfer from boomers and Gen X to their children and grandchildren. These pension-rich and wealthy pensioners will pass their wealth using all tax allowances and outside earlier than they planned in order to give sufficient allowance for surviving with 7 years to spare. So whilst your 20/30 something dc would usually not see their contemporaries getting big gifts from their parents at their age, more and more of this age group will in fact see their peers receiving large sums from retiring parents who will now spend their pensions instead and downsize their properties and give away other assets early.

Retirement planning has been turned on its head. It is the dcs that benefit sooner rather than later. The inheritocracy prevails and the wealth gap will widen.

With a PPR exemption, which is a big deal when you consider the scale of house price increases over the past few decades. Plenty of other countries don’t have the PPR exemption.

What you just described is capital gains tax. UK has it too.

In other words boosting the economy, excellent idea much more helpful than passing on generational wealth which exacerbates inequality

This is true. But other countries have taxes we don’t. For example many countries will levy tax on any gain you make when you sell your home.

Not every jurisdiction levies inheritance tax or capital gains tax. It is not a given.

UK sucks.

Should we just disregard all wills then and allow people to do whatever they want with dead bodies? After all they're dead so they 'can't care'.

IHT is grave robbing in my book. Do whatever you can to minimise the bill.

It might be called inheritance tax, but in the UK it's the estate, i.e. the dead person, that pays it. The tax varies depending on the size of the estate, not on how much each individual recipient gets ( apart from the 100% relief for spouses).
Some countries tax the recipient, so in those countries if you leave a million quid to one person they'll go over their tax free amount and pay IHT, but if you leave it to dozens of different people who've never had an inheritance before, they'll stay under their personal threshold and no one pays any tax.

Yes, Daily Fail article tomorrow: Mumsnet Vipers are Tax Dodging Bastards.

Ok.

But they're dead.

They can't care

Well, you can't pay it if you're dead.

So actually no-one is paying it.

I am aware

Yes of course. And this is unintended consequences I'm talking about.

I didn't want to do this. But still I'd rather my DC spend it on enjoying their lives whilst young then give it away to taxman. Btw so far DC are very sensible and I'm reasonably confident this will go to their education/property fund.

If Labour didn't add pensions to IHT pot I wouldn't be forced to do this but hey ho

@Bobbingtons

At the moment less than 5 percent of estates pay insurance tax. This is predicted to raise to 7 or 8 percent by 2033 so very few people are affected. This really is a non issue for the majority of the population.
The statistic is misleading as when one of a married couple with an estate over the threshold dies, the estate is not subject to IH. Everything passes to the other spouse. Those estates fall under the 'no IHT' group. Of course once the surviving spouse dies the estate pays IT

Fair is subjective. An estate under the threshold could finance dc with money for a house in the outer Hebrides whilst an estate over the threshold might not be enough to do the same for dc in London.

@Hoppinggreen

But you won't be taxed twice, the people who earned it are presumably taxed and then the people who inherit it are - different people.
Having said that I pay all the tax I have to legally but try to avoid any more if I can BUT if I am getting free money I haven't worked for then I don't have a huge problem paying tax on it, its money I never planned for or expected
Beneficiaries are not taxed. Your estate is taxed.

If I’d have given my DCs their inheritance on their 18th birthdays I can guarantee it would have been gone by their 19th birthdays! 18 year olds aren’t renowned for their sensible life choices.

The way that inheritance tax is calculated proves that it is actually targeting the wealth of the dead, not those that stand to inherit. If it were the other way round, then everyone would have a lifetime limit regarding how much they could inherit or be gifted over their lifetime. This doesn't exist in the UK and instead IHT is calculated based on the value of the dead person's estate. It is therefore totally possible for someone to be gifted millions of pounds from several different people and not pay any IHT whilst someone that inherits a small amount from a large estate could be liable to pay IHT.

IHT is absolutely about taxing a wealthy dead people one last time. There is absolutely no reason why the system would be setup in this way if this wasn't the motivation.

It’s a shame the people you’re talking about couldn’t be arsed to give their some of their money whilst still alive eh?

The estate of the deceased pays inheritance tax not those who inherit the subsequent reminder

My point stands , you do not pay inheritance tax if you are alive.

No-one is taxed once they die.

Their beneficiaries are taxed on the unearned windfall income they receive through inheritance.

Oh dear.

Nothing worse than making a patronising answer that's also wrong.

The dead don't pay tax.

The people who inherit pay tax on the unearned income they inherit. But they don't pay it on the first (up to) £1m that's been bequeathed.

No-one is taxed twice. The person who was taxed the first time is DEAD.

Inheritance tax is not unfair. Inheritance is unfair.

Please oh great sage, tell us how it works ‘in reality’.