Does anyone else think that having to pay tax after you are dead is quite a nice ‘problem’ to have.

[Daisydurrbridge]

I am like most people and will never have the ‘problem’ of paying inheritance tax. So many people are fussing and fretting about this tax without a true understanding of the terms under which it will have to be paid.

In my working life, I often had customers complaining about interest rate falls because they had to live on that money. I am not referring to ordinary people but those who needed wealth management advice. The thought that they could spend some of their capital filled them with dread. Only having three cruises a year type of worry.

Once when we were at dinner with friends they were discussing their parents and they remarked a time when they were really quite poor and had to live on their capital. When I said “quite poor” means having no capital they could not comprehend it.

i wonder if I am so out of step.

Norway, most cantons in Switzerland ( spouses and children exempt), Australia, New Zealand. All countries with a great standard of living.

What are income taxes like vs the UK?

Do you have any life insurance? Or pensions that would pay out?

The frozen tax bands have far more impact than inheritance bands especially when you look at stagnant wages

Well, our family has had 4 bereavements in 6 years. It makes me sole beneficiary. Obviously, I’d rather have all of them back even though my parents were in their 90s and no one would say they didn’t have a good innings. All the ins and outs of how the tax works makes me glad that I can afford a solicitor and accountant. I do not have a wealth manager and I don’t do cruises.

There is one thing that would really help that no government ever seems able to do. That would be make the whole process of inheritance simple and quicker. It they charged more for that then that would be fair in a way that inheritance tax or capital gains etc. could never really seem to be.

The process of grief is long for many people. Having to deal with an inheritance is time consuming even when those who passed away have all there finances in order. But mostly it’s just sadness in paper/document form. Responsibility at a time when duvet time would be a preference.

Also, they earned money and it was taxed. They saved money and it was taxed. It’s been taxed so praps instead of tax there should be transfer fees of a realistic amount, maybe even based on where one lives and property prices. And I will also come back to the time factor here. Whilst waiting for probate I’ve had to pay for security, insurance etc. etc. Inheritance isn’t a cost free activity.

Norway as far as I understand is 22 pc. Australia and NZ more complicated as both progressive/banded rates but nz as low as 10 pc then 33pc on income over 180,000. Australia a bit higher I think- about 45pc on a similar top income level. Switzerland is more complicated because of Cantons.

But all comparable or better than uk, so it’s not as if their income tax is instead of the IHT.

I know that middle earners in the UK are taxed lower than other European countries but difficult to compare to Norway as they have their SWF. But unsure re OZ & NZ.

IHT is nothing to do with deprivation of assets. That’s a completely different issue where someone who knows they are going to need care gives away their assets in an attempt to force the LA to pay for their care instead.

of course IHT is something to do with deprivation of assets. Gift giving is tied up in estate planning. It covers more than care home costs. There has been mention on this thread of how people may as well be spending their capital because otherwise when they die there’ll only be more going to the taxman if they don’t. There’s only so much you can spend on yourself, most people who have saved all their lives have done it for a reason- to provide for themselves in their own age, or to set their children or grandchildren up, especially now that housing is so expensive. If more and more is going to be taken from ordinary people by the taxman on death, they’re going to want to make sure it gets to their children or grandchildren some other way.

I agree @CurlyhairedAssassin

It's unlikely inheritance tax will be an issue for me, but im making sure it doesn't.

There's lots of ways to 'give away' money. I settle invoices, buy their expensive household items, pay ad hoc bills.

Gifting to avoid inheritance tax is one thing. If you survive 7 years, great. That is not deprivation of assets, as long as you have no expectation of needing care.

gifting to avoid care home fees is a different matter. There is no time limit and if you need care the LA can come after the money to pay for your care.

me, physically fit and 50 years old can give away everything. If I die within 7 years it will be subject to IHT. If I have a stroke and need care, it is not deprivation of assets because at the time I made the gifts there would be no reason I needed care.

if I get a diagnosis of early onset Alzheimer’s tomorrow, and then start giving my money away as I want my kids to have it and not pay for care, that is deprivation of assets and if I ever need a care home or care, the LA will come after my relatives to pay.

they are two separate things, unless you’re getting into semantics like I give it away to avoid care, then die before I need care in which case it comes under IHT rules if it’s within 7 years.

😳

From a poor and also abusive background, social services involved and some relatives have been in prison.

Studied whilst working FT and changed careers and did quite well. Managed to marry a decent man, he worked long hours like me. Our assets are in IHT territory. We have always had great holidays and eaten out a lot, enjoyed life but had thoughtful spending. We have a passive income from our investments and very good pensions. So far we have inherited nothing, we may inherit about 500k from DH side. but not banking on it. My half sisters still live in poor circumstances in NMW jobs, they married criminals unfortunately. I have cut off most of my family for their scummy ways.

I would think MN is not a supporter of bootstrap theory but that is exactly how I made it. I will absolutely be minimising my IHT bill.

Here's a breakdown of how much tax you would pay in Norway vs the UK at different incomes.

Taken from these net pay calculators:
UK net salary calculator
Norway net salary calculator

With an exchange rate of 13.9 NOK to 1GBP

Income ----> Take-home (Norway / UK)
£20k ----> £16.6k / £17.9k
£30k ----> £23.1k / £25.1k
£40k ----> £29.7k / £32.3k
£60k ----> £42.7k / £45.4k
£80k ----> £52.7k / £57k
£100k ----> £63.4k / £68.5k
£120k ----> £74.1k / £76k
£160k ----> £95.4k / £96k

You can see that for all earners below about £100k, you would be paying about 6% more of your gross salary in tax.

Earners above £100k pay pretty much the same tax as in Norway already... but unlike the UK, you don't lose access to 'universal' state benefits. Eg in Norway, child benefit isn't means tested.

oh, and welfare in Norway is based on what you have previously paid in. Eg If you lose your job, you can apply for a daily allowance which is calculated from your previous income. The intention is to support you to 'get back on your feet'.

There will be iht for my off spring to pay, assuming I don’t go into care home. I’m not concerned they will inherit and tax will be on about half of what they inherit at present. If I was married or widower/widow they’d not pay anything

With regard to the erroneus double tax on pensions - pension contributions are made before tax so that is not an example of double tax as tax was never paid on it. Pensions were never supposed to be about amassing money for families to inherit but provide a comfortabe retirement. However high earners have used pensions to avoid payine income tax through "salary sacrifice"

Unfortunately what will actually happen is that most homes will be sold to landlords with mega portfolios instead of the council as noone else will be able to afford a deposit. When they own the entire town, they can put rents up to whatever unreasonable amount that they like as people won't have a choice to rent an affordable property which will also put up the housing costs for the council.

I cannot disagree more with the idea that all your assets go back in to a pot.

We've worked bloody hard raising our children and giving them the best we can manage. I want whatever I've managed to gather to be theirs. They're welcome to whatever I have for as long as I'm alive.. parenting doesn't stop imo. And I want it to be theirs when I'm gone.

@strawberrybubblegum that seems like an excellent idea.

The thing is, this scenario would be extremely rare. Most people do not pay IHT on their estate.

To be honest, it completely fucks me off how many times they tax the same bloody pound

If you leave your house to your children then your total allowance is £500k, so neither you or your brother would pay IHT. Presumably you chose to live in a more expensive area than your DB?

Whilst it’s clearly awful to lose both parents within a few weeks, paying £120k in IHT means they must have left at least £1.3 million.

Trust me, if someone has earned £25k all their working life there not likely to have a big enough pension pot or house or savings in order to pay IHT. Someone on that income wouldn’t get a mortgage on a £500k house for a start!