Inheirtance tax of 10%

IHT is very newsworthy but fiscally irrelevant for the country and for most people. It raises only 0.5% of the UK's total tax take and the vast majority of people don't pay it. For a married couple with a house, the 2nd spouse to die will only pay it on assets above £1m. Given that a few years in a care home will cost you £70k+ per annum per person, even moderately well off people are unlikely to have an estate worth of £1m+ when they die.

Given this I always find it surprising how worked up the right wing press get about IHT. I think it plays well with people who think that the left wing are out to take everyone's hard earned money. (Not true by the way, total tax as a percentage of GDP rose to their highest levels under the Tories, even for the very rich, VAT rising 20% under Osborne was extremely significant)

Taxes aren't really about raising money that the government can then spend - that's not how an economy works, the government has to spend money to put money into the economy first, then most of it comes back via taxes. Taxes are principally a way of encouraging or discouraging certain behaviours. Think cigarette and fuel duty. Progressive income tax rates are a way of encouraging poorer people to work and be productive, but stopping too much wealth concentration at the top (rich people actually spend a smaller proportion of their wealth, cash in the bank isn't good for the economy).

So with IHT you actually want wealthy older people to not hoard their wealth. Piles of cash in the bank are bad for the economy it should be out in the economy cycling round. An elderly couple in a huge house blocks a house that could be better used by a younger bigger family.

So actually I think the current regime with quite a high rate is OK. If it encourages people to trade down their property, give some of their wealth to their kids when it's most useful, buy an annuity that is in turn invested in companies, then it's achieving the right aims..

Of course you'll never get a proper discussion like this, politics and the media has largely been reduced to sound bites. Read the FT or The Economist if you want to understand stuff like this in detail.

Sounds quite sensible but I don't have an issue with IHT anyway. My main beefs with IHT is that you have to pay it before you get the money from the estate, which is bonkers. And that there are no allowances for someone dying suddenly when they are relatively young.

Someone in their 80s has time to plan and give away money earlier. Someone in their 40s with a family doesn't (assuming accident or short term illness) but as far as I know there are no allowances for that.

Does it really affect the squeezed middle more than other groups? Receiving an inheritance is not a given and if i am the beneficiary of a £100k estate, tax of £10k is paid I receive £90k.

And the liberals before that in the nineteenth century.
my point is that the party is irrelevant: taxing estates has been around for a long time and it’s hardly a new idea from labour to fleece people.

Will the royal family still be exempt?

Sounds like they left it to late to do any IHT planning. An estate of £9m would well have been worth getting the IHT experts to change wills/ownership and/or set up trusts to avoid paying £4m.

But it replaced capital transfer tax which had been introduced by Labour in 1975.

This would affect the already "squeezed middle" not those with large estates.

This really wouldn't work
My colleague's father has already put one of three houses he owns into her name and one into her siblings', retaining the house with the lowest valuation in his own name, without even denying it's to avoid inheritance tax. If you get rid of the seven year rule anyone who knows they have a terminal illness or age related heart failure will obviously do that with impunity - including very wealthy people with multiple expensive properties.

What do you mean the very rich don’t pay much at all? I guess not ‘very rich’ but when a friend parent died they paid over £4m in inheritance tax. The estate was worth about £9m and most wrapped up in property so hard to liquidate in the required six months. They ended up auctioning a lot of art to try and make interim payment.
It that aside, are exemptions scrapped to (spouses inheriting house, the £350k exemption)? It is arguable whether a 10% across all would raise the same as the current structure, but getting rid of exemptions will certainly cause issues for many.

How quickly could this change come into force?

Modern IHT was introduced by the conservatives in the 1980s.

They won't wait until people are dead, though, will they? Next, a wealth tax that everyone pays even on the equity in their main home.

Yes this is true, if all someone leaves is their funeral insurance plan or the small sum they've saved specifically so as not to leave their children in debt for the funeral which won't leave anything left over!

Even a 10k exemption would work for that though.

I don't see how the 7 year rule can go though as no one will have a record of all their gifts throughout life. It is our money to spend and gift as we see fit. You need some kind of cut off point which probably can't be on your deathbed. So you keep the 7 year rule but charge only 10 per cent on the residual estate. You would also still need to keep no IHT between spouses upon death or people would struggle to pay the tax if a house they still lived in was the main asset.
With Burnham the devil is in the detail and people like poster above who are anti inheritance would do better to go and live in North Korea. Private property passed down the generations does not belong to the Government in my book.

That would suit me. The wealthier folk set up trusts to avoid paying anything.

Labour have run out of living people to fleece, so now they are after the dead's money

It hardly matters if it reduces tax for the rich, most of whom go to vast lengths to avoid paying anything via tax lawyers and international accountants. If you make the % smaller, there's less incentive to avoid paying it.

RR's first budget changed so much on the IHT front that it spurred us into taking our tax-free lump sum when we didn't need the money and giving it to our DC.

That's the point that "normal" people pay something. The more people liable to a tax, the more revenue raised.

"Rich" people don't pay IHT anyway - they either move abroad or set up trusts and other tax avoidance schemes.

IHT raises remarkably little tax at the moment, so it's kind of a pointless tax. Only £8.5 billion was raised out £1,232 billion so less than 1% of total tax revenue.

That's what happens when you have a cliff edge along with a huge percentage - it encourages people to take action to avoid it.

A much lower rate spread over huge numbers of people will bring in far more tax revenue and there'll be little point in spending thousands in professional fees to avoid it!!

In that case, fill your boots.

All inheritance is unearned and a horrible kind of 'luck'. The country needs money so whatever brings in more with the least pain. And inheritance tax is very little pain.

It is a tax reducer for the rich - my estate would pay less as under the current system I lose the residence nil rate banding.

Agreed. In our case 40% would be due on money that’s already been taxed. If the rules don’t change we’re young enough to move our lives elsewhere knowing we’ll be making our kids’ lives easier.