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AIBU?

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Original poster

Labour should increase inheritance tax to 50 per cent

309 replies

Tummyachey · 01/08/2025 17:19

If they did this it would raise billions of pounds - while avoiding raising taxes on working people. Exemptions should be put in place to protect small businesses; I accept this would be complicated, but they need to try and make it work.
So much money could be raised and it would also encourage earlier wealth transfers which would stimulate the economy. In addition, it would help redistribute wealth thus reducing inequality.
There would be political backlash, of course, but they need to get the economy growing and should act now so that the results are visible in time for the next general election.

OP posts:
Original poster
Tummyachey · 01/08/2025 21:03

suburburban · 01/08/2025 20:46

Perhaps they could go after the criminal gangs and money launderers instead of constantly fleecing the legitimate citizens who try their best to be self sufficient and save and have the audacity to own a modest property

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They should of course go after criminal gangs and money launderers. Raising IHT doesn’t stop them doing that.

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Pictishblue · 01/08/2025 21:03

Tummyachey · 01/08/2025 20:59

But how will he raise money to pay for public services?

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We can't.

We are massively over extended.

The population growth of the last 25 years has trashed the economy.

Redburnett · 01/08/2025 21:02

You obviously know nothing or very little about inheritance tax OP.

Neemie · 01/08/2025 21:01

SleeplessInWherever · 01/08/2025 20:22

People talk about the costs associated with living in the South, like somehow you were dragged there kicking and screaming and forced to stay.

I grew up in Teesside, I now live in Cheshire. There is a huge cost of living difference. I bought my first house for £155k in 2018, that wouldn’t get me anything here. Nothing I could fit my family into anyway. Perhaps a shed.

Nobody made me move somewhere more expensive, and I’m aware enough of the COL difference in the South/South East to know that that’s worse still, and for that reason - I’m not living there.

We can’t decide what taxation of wealth looks like based on whether it’s more unfair for people who live somewhere else in the country. Leave, if you don’t want to deal with the cost of living there.

People who own property and live in those areas have more, that’s how they live there. If that means they pay more IHT? Good. They have more available, or they wouldn’t be able to own a £1m+ property in Surrey.

London - those entitled bastards. How dare they complain about cost of living. Who needs people to be working in London anyway? Who needs London?

Original poster
Tummyachey · 01/08/2025 20:59

caringcarer · 01/08/2025 20:58

I really don't car becaus Nigel Farage has said he will reverse all of Labours jealousy taxes once he is PM.

But how will he raise money to pay for public services?

OP posts:
LegoLivingRoom · 01/08/2025 20:59

NotTerfNorCis · 01/08/2025 20:55

What is the case for adult children who inherit from parents? Don't the children have to pay tax on inheritance over £350k?

Are there any government or other legal links explaining this?

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Children includes adult children. So the same rules apply.

The government website explains it here: https://www.gov.uk/inheritance-tax

How Inheritance Tax works: thresholds, rules and allowances

Inheritance Tax (IHT) is paid when a person's estate is worth more than £325,000 when they die - exemptions, passing on property. Sometimes known as death duties.

https://www.gov.uk/inheritance-tax

caringcarer · 01/08/2025 20:59

Pictishblue · 01/08/2025 20:56

The problem is the squeezing is announced at the same time as yet another splurge on something completely optional.

The IHT tax which will be severely detrimental to family farms will raise about 500 million from the children of farmers who try to stay in farming.

Literally the week after Reeves announced it Lammy donated 500 million to African farmers.

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👏👏

Original poster
Tummyachey · 01/08/2025 20:58

Pictishblue · 01/08/2025 20:56

The problem is the squeezing is announced at the same time as yet another splurge on something completely optional.

The IHT tax which will be severely detrimental to family farms will raise about 500 million from the children of farmers who try to stay in farming.

Literally the week after Reeves announced it Lammy donated 500 million to African farmers.

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This doesn’t answer the question - having said which I agree Labour should be careful about how they splurge the money raised.

OP posts:
caringcarer · 01/08/2025 20:58

I really don't car becaus Nigel Farage has said he will reverse all of Labours jealousy taxes once he is PM.

Pictishblue · 01/08/2025 20:56

Tummyachey · 01/08/2025 20:36

Where would you prefer it to be squeezed from?

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The problem is the squeezing is announced at the same time as yet another splurge on something completely optional.

The IHT tax which will be severely detrimental to family farms will raise about 500 million from the children of farmers who try to stay in farming.

Literally the week after Reeves announced it Lammy donated 500 million to African farmers.

Original poster
Tummyachey · 01/08/2025 20:56

Viviennemary · 01/08/2025 17:55

Labour are very good at taking people's money. That's why I for one won't be voting for them again.

People are only going to vote for them againif the economy starts growing and they start feeling better off. Labour need to raise money somehow and increasing IHT would cause less damage to the economy than other options.

OP posts:
NotTerfNorCis · 01/08/2025 20:55

AmateurNoun · 01/08/2025 20:52

As explained upthread, it's £1m before any tax is due for a married/civil partnershipped couple who are leaving their home to their children/grandchildren.

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What is the case for adult children who inherit from parents? Don't the children have to pay tax on inheritance over £350k?

Are there any government or other legal links explaining this?

AmateurNoun · 01/08/2025 20:52

NotTerfNorCis · 01/08/2025 20:49

I think more people would support the idea if they understand that only 4 per cent of estates were affected by it.

Is that really true? I thought inheritance tax had to be paid on anything above £350k. Most houses are worth more than that now, especially in the south. So a large number of people are going to end up having to pay inheritance tax. The problem is that when someone dies, their estate is frozen. The person inheriting can't access the money until they've paid the inheritance tax. They may end up paying it out of their own pockets, suddenly finding themselves in a situation where they have to produce a large sum - say,£70k. The tax is 40% on any amount left over £350k.

As explained upthread, it's £1m before any tax is due for a married/civil partnershipped couple who are leaving their home to their children/grandchildren.

AmateurNoun · 01/08/2025 20:49

FullOfLemons · 01/08/2025 20:30

I was just using the terminology used by HMRC.

We already have rules on gifts (i.e. annual and small gift exemptions). As such, I don’t see how it would become harder or more expensive to administer than what we have today.

I am struggling to understand why you think this is so radical or indeed why being radical is a bad thing.

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It's used by HMRC to describe gifts within 7 years of death that are subject to IHT. You are using it meaning the exact opposite - ie gifts more than 7 years before death that are not subject to IHT.

It would be a fundamental change because at the moment (leaving aside trusts) the whole system is geared up around taxing people who have died after they have died on the value of their estate immediately before they died and on transfers they have made within the last 7 years. It wouldn't be impossible to make such a change but it would be a very radical change with increased administrative costs and be harder to police. To be effective, you'd probably need to switch to taxing all lifetime transfers upon the transfer in the same way lifetime transfers to trusts are taxed.

I'm not suggesting that radical change is wrong - I am just saying that it is completely and utterly wrong to describe such a change as closing a loophole.

NotTerfNorCis · 01/08/2025 20:49

I think more people would support the idea if they understand that only 4 per cent of estates were affected by it.

Is that really true? I thought inheritance tax had to be paid on anything above £350k. Most houses are worth more than that now, especially in the south. So a large number of people are going to end up having to pay inheritance tax. The problem is that when someone dies, their estate is frozen. The person inheriting can't access the money until they've paid the inheritance tax. They may end up paying it out of their own pockets, suddenly finding themselves in a situation where they have to produce a large sum - say,£70k. The tax is 40% on any amount left over £350k.

Original poster
Tummyachey · 01/08/2025 20:47

Fearfulsaints · 01/08/2025 17:51

In the spirit of raising taxes, im always intrigued if having a much smaller amount paid on a bigger number of estates would raise more. Like if everyone paid 5% of anything, rather than only 4% paying 40% over the threshold

I think this would be even more unpopular -and it would not reduce inequality.

OP posts:
suburburban · 01/08/2025 20:46

Tummyachey · 01/08/2025 20:40

If the government only ever does what’s popular, rather than what’s right, this country will eventually go bankrupt.

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Perhaps they could go after the criminal gangs and money launderers instead of constantly fleecing the legitimate citizens who try their best to be self sufficient and save and have the audacity to own a modest property

Pictishblue · 01/08/2025 20:45

It will change in 2027 with the addition of pension funds.

Over three years it will raise about enough to pay a weeks worth of interest on government borrowing.

The government says there an estimated 213,000 estates per year with inherited pension wealth. That’s a much larger number than the number of estates currently liable for IHT (27,800 taxpaying IHT estates in 2021-22, estimated to rise to 37,000 by 2016-27.)

Most estates will continue to have no Inheritance Tax liability following these changes. The government estimates that, out of around 213,000 estates with inheritable pension wealth in 2027 to 2028, 10,500 estates — or around 1.5% of total UK deaths — will become liable for Inheritance Tax where this would not previously have been the case. Around 38,500 estates will pay more Inheritance Tax than would previously have been the case. These figures do not take into account potential behavioural changes following the announcement of this measure, and as such should be viewed as an upper limit.

Original poster
Tummyachey · 01/08/2025 20:44

NotfinanciallyresponsibleforyouSadTimes · 01/08/2025 17:49

Tax avoidance is the route to go down. Let’s pursue those who are actively avoiding tax. More trickier to catch but potentially a lot more to be gained there than increasing IHT.

Plenty of businesses as well as individuals. The inland revenue should be working more closely with banks to id these individuals.

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We should do both - increase IHT and tackle tax avoidance. They’re not mutually exclusive.

OP posts:
Original poster
Tummyachey · 01/08/2025 20:40

doodleschnoodle · 01/08/2025 17:36

Labour are unpopular enough at the moment. IHT is an unpopular tax even among those who will never be liable to pay it. It goes against that kind of ‘British value’ of working hard and providing for your family and the state not taking what you have earned, which is a belief that a lot of people, including Labour’s traditionally core voter base, have. I think they would be very foolish to do anything that increases IHT.

If the government only ever does what’s popular, rather than what’s right, this country will eventually go bankrupt.

OP posts:
SleeplessInWherever · 01/08/2025 20:38

Pictishblue · 01/08/2025 20:30

The South is a little bigger than Surrey.

Edited
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It was an example.

Original poster
Tummyachey · 01/08/2025 20:36

AmateurNoun · 01/08/2025 17:31

Labour have also recently made changes to IHT to raise ~£2B/year including IHT on pensions and APR/BPR reform. How much more do you think they can squeeze out of it realistically?

Where would you prefer it to be squeezed from?

OP posts:
Original poster
Tummyachey · 01/08/2025 20:31

GasPanic · 01/08/2025 17:29

They'd be better off closing the loopholes on avoidance.

Inheritance tax is a massively misunderstood tax.

The vast majority of people seem to have a huge aversion to it, even if their estates won't actually pay it. The % of estates that pay it at the moment is around 4%. It's genuinely weird how much the public misunderstand it.

I think more people would support the idea if they understand that only 4 per cent of estates were affected by it.

OP posts:
Pictishblue · 01/08/2025 20:30

SleeplessInWherever · 01/08/2025 20:22

People talk about the costs associated with living in the South, like somehow you were dragged there kicking and screaming and forced to stay.

I grew up in Teesside, I now live in Cheshire. There is a huge cost of living difference. I bought my first house for £155k in 2018, that wouldn’t get me anything here. Nothing I could fit my family into anyway. Perhaps a shed.

Nobody made me move somewhere more expensive, and I’m aware enough of the COL difference in the South/South East to know that that’s worse still, and for that reason - I’m not living there.

We can’t decide what taxation of wealth looks like based on whether it’s more unfair for people who live somewhere else in the country. Leave, if you don’t want to deal with the cost of living there.

People who own property and live in those areas have more, that’s how they live there. If that means they pay more IHT? Good. They have more available, or they wouldn’t be able to own a £1m+ property in Surrey.

The South is a little bigger than Surrey.

FullOfLemons · 01/08/2025 20:30

AmateurNoun · 01/08/2025 19:11

Yes at the point of transfer it's a PET because you don't know when the transferor will die. If the transferor dies with 7 years it remains a PET and is taxed, if they survive 7 years it becomes an exempt transfer and is not taxed.

PETs are taxed as otherwise everyone would just transfer everything on their deathbed.

So if you're saying that you want to remove the exemption for transfers which took place more than 7 years before death you will have a tax that applies throughout everyone's lifetime on all relevant transfers. Want to give your kids some money to help them buy a house many years before you die? It would be taxed. Some people might like that but others would hate it and it would be much harder and more expensive to administer.

It could be done but would be a radical change to the nature of the tax and like it or not it's ridiculous to suggest it's "closing a loophole".

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I was just using the terminology used by HMRC.

We already have rules on gifts (i.e. annual and small gift exemptions). As such, I don’t see how it would become harder or more expensive to administer than what we have today.

I am struggling to understand why you think this is so radical or indeed why being radical is a bad thing.