Inheirtance tax of 10%

Because the uncle in this scenario died without any direct descendants 40% IHT was paid (no residence nil rate banding). Nevertheless a fabulous (and completely unexpected) windfall for a 22 year old.

Does that mean the estate is sold and the beneficiary declares the entire inheritance as income?

What happens if one person inherits a house - do they pay nothing or is something triggered (perhaps by registering the transfer of ownership) forcing a valuation so the windfall can be taxed?

It sounds as though it might be fair but it depends how it works - it wouldn't be if the inheritor of a very high value property could avoid tax by not selling it and moving in/ renting it out/ leaving it empty.

A few people do this, but most don't either because it feels unfair if the middle aged "children" never inherited anything substantial from their own grandparents' generation, or because they don't change their wills in the last 20+ years of their lives, or because they use inheritance as a threat/ bribe over their children.

Skipping a generation would legitimise the argument about giving the young a step up, but that's still no reason it shouldn't be taxed! That windfall was just an unearned stroke of luck for the young man and he absolutely shouldn't complain about paying 10% - or even to be honest 40% tax on money that quite literally fell into his lap without him exerting the slightest effort. He'd still have 60% of something he did nothing to earn!

There's a whole discussion about whether taxes fund expenditure or vice versa and particularly which one comes first (the answer is government spend). Also to what extent we actually need to balance tax and spend (the answer is less than the right wing, or the current neoliberal Labour party would have you believe).

However even if you do believe that taxes and expenditure should roughly balance, IHT is insignificant, it represents around 0.5% of the total tax take, and almost nobody pays it. Which as I said before makes it bizarre that everyone gets so wound up by it. Unless you're anticipating having an estate of £1.5m or more the amounts involved are either zero, or relatively little (on a £1.5m estate your beneficiaries would still receive £1.3m which I imagine would make them pretty happy).

I agree to a point. But many taxes aren't to encourage or discourage behaviour, they're just a way to raise revenue. For example stamp duty.

Or skip a generation: either when the will is drawn up or through deed of variation.
dh’s uncle skipped a generation and sole beneficiary was a 22 year old without a property which was an absolute boon for him.

Either everyone pays or no one pays. People have already paid tax through PAYE, VAT, stamp duty, tax on pensions.

Social care is a societal need not a luxury so everyone needs to pay into it.

Any more taxation and we’ll lose jobs and those earning more because they are not seeing any benefit from the contributions being made.

The other thing we could do is tax the beneficiaries not the estate. That’s how it works in Germany.@UlyssesandThatBookYourAuntieWrote

if there is more than one beneficiary house would be sold anyway to distribute the estate so no change in the process.
Although it does have all the makings of a daily mail sob story …

Labour = levellers

This is disingenuous because it's rarely what happens. Generally, unless parents die prematurely, the money goes to "children" in their 50s and a token amount (maybe enough to buy a used car or go interailing) to grandchildren.

If parents really wanted to set their children up they'd downsize right down to a small "future proof" two bed when the youngest child finishes whatever full time education they have chosen, and use the capitol released to give each child a deposit for a first flat.

Obviously nobody actually wants to do that and 95% exercise their right to rattle around a big house, possibly telling people that they need it so they can host Christmas.

That's what should happen though - grandma's grandchildren can all have a deposit for their own house and at least 10% back in the tax pot.

Actually perhaps the increase in value should be taxed as a capital gain if inherited by anyone but her spouse... After all it is not merely a capital gain, just a pure windfall for the inheritors.

You are right and I expressed it poorly.

It penalises the philosophy of saving to benefit your descendants. Foregoing luxuries perhaps to enable your children or grandchildren to get a foot on the housing ladder.

I think it's very natural for many people to want to do this and it should not be discouraged or disadvantaged by the tax system.

Wouldn’t Grandma who worked hard all her life, managed to buy her (bargain price) council house in 1970. Have to fork out 10% of eg £600,000 -means the property will have to be sold to raise the £60,000 - lots of sob stories etc ensue -plan is dropped

I would rather he closed loopholes and similar for people very wealthy so they cannot get away with paying nothing and ordinary people for whom £10,000 may be a lot proportionally and comparatively.
I would resent paying more than a millionaire.

It doesn't penalise the person that's saved. They have all of their savings right up until they die. They really don't need any money afterwards!

It penalises the recipients who get something for free that they haven't worked for.

If you have saved during you life and you want to give some of those savings away, then do it sooner rather than later. Giving someone £50k when they are 30 so they can put a deposit on a house is a lot more useful than them getting £100k when they are 60 and you die. IHT encourages exactly this behaviour.

Graded taxes are usually fairer I think?

. Someone with no savings and getting a 50k inheritance losing 5k will be big hit

getting a 500k inheritance and losing 100k instead of 50k - well you are still wildly rich

not sure it’s the most unfair tax…2% more tax for savers next year. That is penalising people who save.

Any timeframe?

Apologies from me too - well and truly tangled!

IHT is the most unfair tax. First people have already paid tax on their money when they earned it and secondly it penalises people who save rather than spend.

The possible proposal is a 10pc flat rate upto an estate of £2m and 20pc above this.

So I don't think it will completely eliminate structuring and tax avoidance at the high end. I'd also be extremely concerned that those thresholds never ever changed so more and more people got dragged into the higher end.

Finally it would be very tempting for future governments to increase that 10pc to 12pc etc so creep would be a risk.

I'd rather see it just abolished entirely to be honest. It does not raise that much.

I understand that - I wasn't arguing with you, I just quoted you to argue with the idea, so I think wires got very tangled at both ends there. I apologise for lack of clarity!

????
think you have your wires crossed
I was responding to a suggestion that labour will soon want inheritance to be taxed at the recipient’s marginal rate plus national insurance.

Not really a "stupid comment". Taxes are a method of encouraging or discouraging behaviour, eg tax on cigarettes. IHT raises very little so it's not really a method or raising tax revenue

With limited number of houses therefore you may want to encourage older folk to move out of their big houses into something more appropriate, freeing up space for younger bigger families Similarly a pile of cash in the bank isn't very good for the economy, if it was spent it stimulates economic growth.

IHT encourages both of these things, ie discouraging undesirable behaviour. If you want to own 3 expensive houses in your 80s, then that's fine, in the same way that people own expensive thirsty cars, or continue to smoke. As the poster said IHT is a tax on hoarding

You may think that IHT is theft, but on that basis all tax is theft. I've worked for my money but the government is taking 40%, or even 45%. I've paid tax on my earnings, and then there's another 20% VAT (a much bigger tax generator). I've paid tax on my earnings bought some shares and I have to pay CGT on their growth. It's all just a way of generating tax revenue. The key is whether they encourage or discourage effectively.

Plenty of people inherit property they could never have afforded to buy, and which the deceased couldn't have bought at current prices either, but don't earn much themselves (or don't earn much any more because they're pensioners) therefore don't pay much income tax. It should be on property value.

Plenty of people these days inherit from their parents when they've already retired, especially if they retire early. Some people never work much and live off benefits and their parents and inherit a grandparent's house. No reason they shouldn't pay based on property value.