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!

a rebalancing where work is taxed less but inheritance is taxed more

Yes!! This is what is needed.

I hear this repeated so often but that really isn't true.

Do you know who pays the biggest percentage of their estate in IHT (according to HMRC)? It's estates worth between £3 million and £10 million. They end up paying around 24% of the entire estate in IHT

That's not exactly "middle income people" to my mind.

Estates worth more than £10 million do end up paying less as a percentage but they're still paying around 20% of the entire estate in IHT.

So what exactly is "middle income"?

Well, median income for a full time worker is currently £37,400.

Let's say that this person left an estate worth £550k. HMRC say that, of people leaving this much money, 76% didn't pay any IHT at all and of those 24% that did pay IHT they paid on average 10% of their entire estate.

So yes, it's definitely those hard hit "middle income people" leaving estates of £5 million that have it worst.
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"...the really wealthy put their assets in trusts"

But doing that doesn't really make much difference.

Probate records show that the last Duke of Westminster left an estate worth around £600 million in trust to his children with the income going to his widow and she is allowed to remain living in their home.

When the widow passes away then there will be IHT to pay on that £600 million just as with anyone else when the second spouse dies.
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With regard to the trusts that are said to be worth £9 billion, these trusts do pay 6% tax on the total value of the trust every ten years (or at least most of them do).

The trusts also have to pay income tax on any profits at a flat rate of 45% and there is also CGT to pay as well if they ever sell any assets.

So while, IHT itself is not payable there is a 6% charge every ten years. This works out to paying the same amount but spread out over roughly 66 years in advance rather than paying it in one go on death.
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But not all of the trusts pay that. Why? Well, that's not down to being a trust but down to other reliefs that are widely used - Agricultural Property Relief and Business Relief. If you own a farm or a business then you don't have to pay tax when you die and trusts don't have to pay the 6% tax every ten years.

Or, at least, until the recent budget. As of 2026, Agricultural Property Relief and Business Relief will be limited to £1 million.

I don't know what effect this will have on trusts, but I would guess that they will likely have to start paying some tax.

Congratulations, you are far more well off than most people. It doesn't feel like it now because you're paying a big mortgage... but that is your choice. If you downsize (now or when you get older) you'll have more liquid assets.

When you die your children will inherit a nice chunk of money. The tax will go to public services and in turn help the NHS, schools and councils for your children as they get older, and their children, and grandchildren.

Those who are inheriting hundreds of thousands aren't the middle.

@TheSpoonyNavyReader your first post said “My savings pensions and money that I have used to buy my home be taxed again.”

I pointed out that your pension contributions hadn’t been taxed, so if they remain in a pension scheme on your death (ie you have not paid income tax by drawing a pension) then it is right that your pension is taxed at that point. No one can expect to save into a pension tax free then pass that onto their children tax free.

I am personally in favour of abolishing council tax and stamp duty in favour of a land value tax based on current property values. This would take into account the massive unearned increase in the value of my house.

No I don't remember May trying. I remember her getting bullied out of her job and nothing much really getting done in those years.
But wait - childless? retired ? Are you actually May herself ?

Absolutely agree

Me too

The point is that we do both pay high taxes while alive and dead. The taxes are more than enough but wasted.

One of the major issues is that Probate is taking 12-18 months and assets like houses cannot be sold until after the probate has been completed

Surely this is only in very complex cases, we recently submitted my DM's six or seven weeks after she died and it took them a month to grant probate. Searching on MN other people were giving similar time scales.

FACT: 96% of us won't pay IHT.

*didn't. That's historic data. Reeves has said that it'll be 6% this year, and the OBR has said that this will almost double by 2030, so I think an awful lot more of us will be paying IHT in the future!

You're not in that bracket. If you end up in it it will be because you're dead, so it's not like it's a good position to be in financially. And if you still have life insurance and a death in service payout then that will be because you died young, so that is basically a tragedy for your children who may still be young enough to need that money to be spent on raising them.

Farmers will be forced to sell land
That'll go to the grabby developers as Labour push on to concrete over every bit of our country
And no we don't need house building on this scale, we need urgent migration control. That isn't a race issue it's a genuine over population threat. Another 500 arrivals yesterday...

That’s a bit different though as you can sell it later - better than paying iht on it.

We recently re-did our wills and as we leave everything to each other and then to DS, we were just under the threshold. After yesterday's changes, we now have to include DHs defined contribution pension, which unless we've spent it all by the time we die will take us over.
DH has retired (not yet state pension age) but hasn't needed to drawn on that pension fund. We're just mightily relieved they didn't clamp down on the tax free lump sum!

It’s the change to the countryside that worries me. You can’t go back and unpick that very easily. I mean much of Greater London was fields once …

The tax will be paid by your descendants, you personally have nothing to worry about. Lots of children in this country get nothing from their parents. So you children should appreciate what they get. This is the only way to level the playing field. Otherwise we'll end up like the States with horrendous levels of income inequality and civil unrest

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.

Excellent point

It won't be you paying the tax though, it'll be your children. Why shouldn't they be taxed on an unearned windfall?

Inheritance tax should be higher imo

Au contraire

I know it's not me that pays, and no I'm not worried.

My parent died in their early 50s of cancer and my other parent now has dementia. There was no life insurance to be paid out.

Just astonished that dead me will be one of the wealthiest in the county apparently.

And so? You won't be paying it unless you're inheriting a fair bit. And you can always turn down a bequest.

Shows how much the rest of us need your taxes I suppose!

But you are assuming that one of you and your husband dies while in employment, and the other gets a payout and the mortgage paid off. That probably doesn't happen to even 1% of people.

Lifetime gifts can actually have repercussions up to 14 years prior to death ( it's called the 14 year "shadow ")