Anyone else now falling into possible inheritance tax territory?

[YumiZumi]

I don't feel rich but I will be dead rich!

Big mortgage, high childcare costs so things are tight but if DH or I were to die, then if the second we're to die soon after - our mortgage would be covered by life insurance, there'd be one death in service (presumably the second death in service wouldn't be part of the estate?) plus our current pension pots which don't seem that large. (Or large enough to give a so called comfortable retirement)

All comes easily to over a million. Yikes!

My bank balance tells a very different story!

Well lucky lucky you that you are

Your property wealth is a lottery win. The increase in its value is unearned by you so it's lucky just like a lottery win.

They may be "ordinary houses" (in parts of the country) but for someone without any inherited wealth to own a £750,000 outright now (i.e having not benefitted from the gains in the housing market).they would need to put £50,000 away every year for 15 years (for instance). That's more than the average pre tax salary and shows how unfair things are for the next generation.

(I benefited from the gains but it doesn't make me feel good. I didn't "earn" that money I just got lucky )

May tried, don't you remember but she had to scrap her plans because it was a vote loser.

Yes, the last 14 years was a disaster, but all can we do is hope that someone sensible will learn from it. If not, we will forever have a Labour government and the whole country will be employed by the public sector or on benefits.

I can't really complain as I am not prepared to be a politician (and I assume you aren't either).

I am just happy that I am retired and don't have any children so when Labour destroys the economy, like it always does, it won't really affect me and if it gets too bad, I can afford to leave the country.

There are different ways of dealing with this situation. If there is sufficient money sitting in bank accounts to pay the IHT then the executor can complete a form IHT423 for the "Direct Payment Scheme". HMRC then sends this form off to the banks and they pay any money in the account directly to HMRC to cover the IHT without you first having to get probate.

Secondly, you can choose to pay by instalments. On form IHT400 the executor ticks "Yes" in box 110 that asks "Do you want to pay by instalments" and then there is 10% of the IHT to pay upfront and the rest is payable either annually or when you sell the property. (eg if £40k IHT is due then the first instalment is £4k)

You can combine this with the Direct Payment Scheme above so that the 10% comes straight from the banks.

If there is not enough cash in the estate to pay even 10% of the IHT due then an executor can pay whatever they can and apply for a "grant on credit". HMRC takes a charge on the property (similar to when you have a mortgage) and it is paid off when you sell the property.

In both cases, there is interest to pay so it's best to pay it off as soon as possible.

The tapering of the annual allowance is only for people with an annual income over £200,000 a year.

If you give me a moment I'll dig out my microscope and have a look for an approriately sized violin.

Absolutely.

People saying "they'll" be stung by IHT. No "you" won't. You'll be dead!!!

Death is the true leveller in life. No one is exempt from it, it happens to us all and we all end up somewhere buried or cremated and equally wealthy!!!

If your wealth is needed for your children all that does is prove how fucked up our economy has been for decades because people today shouldn't struggle to have the same wealth opportunities than previous generations.

And if your beneficiaries are liable for IHT they aren't doing badly out of your death either!!!

What about those who die in the interim though?

@Another2Cats Thanks, my cousins had to sell a property so I’m guessing that they paid yearly installments or paid it off when the property was sold. They’re argumentative siblings so that was probably part of the issue!

Oh no, not the tiny 🎻 again…

@TheOnlyAletheia yes passing it on while we can sounds great in theory—except life doesn’t exactly hand you a choice. Will I make it to 75, 95, or barely scrape past 50? Who knows? 🤷🏼‍♀️

Well, there is nothing that they can do if they die after April 2027 except hope they don't die before we get another Tory government, if we ever do.

That is the problem with tax changes, it always affects some people worse than others, it is pot luck if you are the unlucky person.

My mum taught for 42 years.
Died 8 months after her state pension started to pay out.

She worked until covid and only stopped because she was shielding due to the cancer.

You are right that death is the biggest leveller in life!

@itsgettingweird I’ll absolutely be spending every last penny before I go! (Assuming I’m in good health, of course 😇). At this point, what’s the point of saving?

Word of caution!

If you give your house to someone else and then live in it until your death, the house is deemed to be part of your estate unless you paid market value rent to that person.

That is my understanding anyway after extensive research on ways to minimise paying IHT.

Yes ironically that favours the massively wealthy ( who know they can’t possibly need it all between now and dying) as opposed to the quite wealthy.

That's so horribly unfair for your mum, it must have been so hard to see her get so little of her retirement.

I have a condition that means I know my life expectancy could be reduced. I save for a pension but I also try to enjoy my life now as I just don't believe a long life is guaranteed for any of us.

Not really, as someone else has pointed out the really wealthy put their assets in trusts so it's actually the middle income people who don't who will (yet again) pay

A similar thing with my grandfather, he died of cancer ten months after he retired.

Go for it. We talked my now widowed dad in his 70's into buying a new car because it's his money. It was his and mums to enjoy a retirement together. Why shouldn't he have continue to spend it and why should he have a right shipped life just to pass it onto us.

Yes sweet it was devastating. Thank you for acknowledging that.

I think even more so because she was a teacher and they aren't valued anyway. 42 years she gave to raising the next generation and 8 months of her pension whilst dying was her end result.

Go for it, all that money back into the economy and all that lovely VAT on everything you buy.

This exactly what the economy needs you to do. I don't know why you think it's a threat except to your children

My Mum is 93 and in a home. My Dad died and so everything went to her - as normal. He had a daft and complicated will but as he died first it didn't count.

With her savings, houses she, or more correctly we'll pay IHT. We could have avoided this/some of this but it would have involved giving away a house early - who knows how early, who knows how much her care home will cost, how long will she live.

The threshold is around 1 million. Depends on family house, charitable donations in will etc

You can do things but it depends on how long you live after giving stuff away etc. (7 years to be clear of duties)

Me and my siblings will inherit enough - not really a problem and if money is to be spent on worthwhile things then so be it.

You also have to think if measures to reduce IHT are sensible and ethical.

TBH OP's post sums up quite a significant issue - the imbalance in the system that sees people feeling very financially stretched for a lot of their working lives but then leaving estates that are worth really significant amounts due largely to the (rising) value of property. And then of course the situation is looking even more dire for their own kids and they want to help via inheritance - but that creates its own issues.

TBH I think it's fair enough that my or DH's estate will be subject to IHT. At least half of the value of the house is based on the increase in property values in the decade and a bit since we bought it, so we've never paid tax on that money. Ditto our pension contributions. And the same is true for our parents - they are asset rich and a lot of that value is due to inflation-busting asset appreciation rather than work.

An interesting exercise might be to look at a fundamental rebalancing where work is taxed less but inheritance more - I'm not sure what degree of rebalancing would be needed but I'd love to see the sums.

one of the easiest taxes to avoid if (as the rich do) you sort it out early. Spend some money getting suitable advice. When a relative of my partners died he left a million plus. He had a nice house as well. his money was in a wealth fund providing an income and in the event of his death he chose who to leave it to (note - this can be different to a will beneficiary). This sum was not subject to IHT. this link tells you what Billionaires can do and its no different for us except they have a lot more. King Charles was exempt (obviously!) and if/when William takes the throne he will be as well

https://www.theguardian.com/money/2016/aug/11/inheritance-tax-why-the-new-duke-of-westminster-will-not-pay-billions