What do you think of Burnham's plans re inheritance tax?

[JoyousOpalLemur]

He has said in the past that he wants to abolish inheritance tax and replaced it with a social care levy on inherited assets, which will incorporate unused pensions.

I don't totally understand this if I'm honest - I think it means everyone will be dragged into the inheritance tax threshold, but it seems like a fairer tax than what currently exists, and it's there for a purpose (to fund social care).

What do you think?

https://www.independent.co.uk/money/burnham-prime-minister-money-taxes-mortgages-bonds-stamp-duty-b3001078.html

. Missed the image

Oh I agree entirely. I just think that people who have already paid for their care shouldn't have to pay twice effectively. I don't have a problem with everyone paying 10%.

There are many many things I would do but this would not be one of them! It smacks too much of ‘you will own nothing and be happy’ as most of his suggestions did to be fair.

Re your last sentence
I agree
but given Burnhams proposals re LVTax and ignoring all those who’ve paid stamp already whilst letting others off I doubt he’ll let those who have already paid for care off

What do you mean by
’you will own Nothing and be happy’
Its a 10% IHT

You can Google the phrase.
i was talking about this with my Dh the other day I feel really sorry for young people (we have teenagers) I genuinely feel like the cost of everything is being ramped up to the absolute maximum people can pay so we are all just working to pay the bills. The level of intrusion into people’s lives is insane, Everywhere you go, every word you write, every penny you spend is monitored, analysed, chewed up and weaponised against you. This is taxing money that has been taxed at least once if not more. Tax always starts with oh it’s only a few people, it’s only the very rich, it’s only a few % funny how it never seems to stay that way! Governments just throw money around like it’s going out of fashion then just go oh well shrug shoulders let’s tax some more! I read the other day that the UK is currently viewed as a welfare state with a small economy attached!

I suspect this is all ‘research’ to see what gets the least objection then that will happen. The suggestions are a massive reset to a lot of the tax system it would be chaos to bring them all in at once, clearly they want to extract a lot more of our hard earned cash over the years and they have signalled the direction they are going in.

I know what you mean
the alternative is to cut some welfare and that was voted down at the first sniff
or / and
to make everyone able enough to actually work a full working week

Taxes aren’t the only solution and never should be but no one wants to change the rest enough

So true I was reading about tax plans the other day and the comment was that no one was discussing productivity or how to move the country forwards, it was all just about how to get more money from taxpayers and how to hand it out. It made me thing about things again!

I agree with this if the plan is to reduce the insane amounts self funders are expected to pay. The current system is unfair and unsustainable. Care home fees are around £5k-£6k a month in our area, even if you have assets they deplete quickly with those kinds of costs, especially if the person has no private pension.

People seem to be failing to consider the fact that under the current system there won't be any inheritance anyway as the house will go to fund care. Most of my nan's estate got used funding her care costs and my MIL is now in the same boat.

It's a huge worry for families because when the money runs out they either have to pay top up fees, because councils will only pay around £700 per week, or their relative gets thrown out of their care home and put in a cheaper one.

MIL is quite young, theres a good chance she'll outlive the funding the house will provide. The funds in the house will last 4-5 years.

We can't afford to top up £2,400 a month, so we'll either have a battle on our hands with the care home or we'll have to accept that they will take her away from what has become her home, her carers, her friends, to live somewhere new.

All of this would be difficult for any elderly person, never mind one dealing with dementia who is already anxious and frightened a lot of the time anyway.

Yes, I just don't understand how people don't understand how unfair all of this is. For example, with the LVT, over half of houses have been bought in the last 20 years. House prices haven't increased at all in real terms in the last 20 years. So everyone in the South that's bought over the last 20 years has already paid stamp duty, seen no real increase in their house value so essentially all the equity they have in the house is money that they have paid in themselves and now Burnham thinks it's fair to randomly tax them loads more because they have bought a more expensive house that they have had to fund themselves, almost certainly with wages that have already been taxed. How is this fair?

I come from an area with much lower house prices and it's a blessing for local people. Yes, earnings are lower too but affordability is much higher and generally cost of living is lower so many of my friends that stayed now have more disposable income than their Southern counterparts that are stuck with huge mortgages and high interest rates. Now Burnham wants to tax these people more? How is it logical?

It's not a conspiracy to make people pay more tax just because the government hates them

In the 60s and 70s the baby boomers (literally the progeny of the post war baby boom) were just entering the workforce. There then followed a period of several decades where the working age population was disproportionately large compared to younger children (they had less children) and the older generation (who tended to die a few years after retirement). This was an economic boon and meant it was easy to support pensions etc for older people as well as other spending.

Now people are living much longer. The younger generation is smaller due to declining birth rates. It's not unusual to live 20-30 years after retiring instead of 5 years. As a result the idea that one "pays in" to National Insurance etc for your working life and "takes out" when retired no longer makes sense because after a few years most people have started taking out more than they ever paid in.

As a result the amount of money that people need to pay in tax to support the welfare bill (of which by far the larger part is pensions/elderly support) to the same extent as the past is higher. The NHS costs more. Councils also need to pay out for social care and therefore council tax rises.

So your children etc feel more squeezed in terms of tax and QOL. Increasing productivity would help but that requires infrastructure spending and we have massively underpsent on that for decades. Infrastructure spending requires debt or more tax. It's also harder to increase productivity while reducing immigration. Not impossible, just very hard. And contrary to popular opinion spending in other areas eg welfare has already been severely reduced in real terms.

The flip to this is that when the baby boomers eventually pass on there will be a huge potential wealth transfer since they posses more assets (they have been saving for longer so this makes sense). Taking money evenly from inheritance tax would help a lot because it's wouldn't hurt that older generation. Spreading it evenly also means younger generations don't feel the pain from this either. So proposals like the one discussed are a partial solution.

I think what works well with the idea of the 10% charge is that it <feels> fairer too. There is a definite feeling amongst the middle classes that the properly rich don’t pay their share as they’re rich enough to figure out the loopholes/use trusts and companies, and the poorer are receiving more and it all gets paid for by the middle

Now how true this is I’m not sure, but a 10% charge on everyone would probably mean the really rich would be happier to pay it, and the middle would get a “win” - yes the poorer would maybe lose out and there might need to be a threshold, but it would need to be low, to maintain the fairness.

It could be a threshold of 50,000 after funeral expenses. It would also possibly bring more houses into the market as some would have to be sold to pay the charge (although probably banks would have products to deal with that).

Well, the music seems to be changing:

Andy Burnham in a bind over tax as he seeks to shelter middle-earners

"Andy Burnham has sought to reassure voters they will not face big tax rises if he becomes prime minister. But as the tax burden in the UK rises to record highs, economists have warned that the new Makerfield MP will find it hard to avoid hitting middle earners if he needs to raise substantial amounts of revenue.
..
But Dan Neidle, a tax lawyer and commentator, believes the longstanding policy of taxing “other people”, such as higher earners and financial services giants, has “run out of road” and that there are few ways left to raise revenue without affecting middle earners.
...
But the broader trend has been towards higher earners contributing a growing share of income tax. In 2022-23, the top 1 per cent of income taxpayers were responsible for 29 per cent of receipts, up from 21 per cent in 1999-2000, according to government statistics.
...
“It’s more risky to load more revenue-raising on a small group than on a broad base,” said Delestre.
...
There is little clarity over how tax policy will change with a new prime minister and chancellor. While there is no detailed manifesto, Burnham has hinted at a number of expensive policy ambitions, including easing the burden of student loans and increases to defence spending. At the same time he has pledged to leave the “triple lock” on the state pension in place; confirmed manifesto commitments not to raise the rate of income tax, national insurance and VAT; and said he would lower welfare spending by helping people into employment rather than cutting benefits. He has also pledged to cut business rates for pubs and certain family-owned businesses. All this has left open the prospect of further tax increases, on top of two rounds of rises under Reeves’ budgets, raising £66bn."

These people you are taxing are literally dead.
its not taxing people. It’s taxing the house of a dead person. Who no longer lives in that house. Because they are dead.☠️

@Itchthescratch
is talking about the LVT not IHT

It's tax on their children though.
One of the strongest drivers for people to succeed is to give their children better life, this includes inheritance.

At present inheritance tax is heavily based on people in London and SE
Five London areas together paid more inheritance tax than Scotland and Wales

It affects behavior - if you're really rich you can restructure your estate to avoid IHT, even to emigrate. If you're in the middle (in context of your local area) you're screwed, and it's better to stop working or spend it all.

Introduction of flat rate of 10% on all estates would generate much more money and would be much fairer. But Labour will never do this. They will continue hitting the same shrinking group with more and more tax until this group goes on strike

Why do you think Labour will never do this? The alternative is, for the ‘middle class homeowner’ losing all their potential inheritance on care home fees rather than just 10%.

LVT isn't inheritance tax.

Also inheritance tax isn't just about taxing the dead. You aren't allowed to give your money to people when you're still alive otherwise they will apply inheritance tax to the recipient after you die unless you live beyond a certain amount of time. So you can't gift your children a good sized deposit or let them take over your company without potentially falling foul of IHT. It all plays to the idea that your money is actually never yours and the state is entitled to a very large share.

The thread is on inheritance tax. If you want to do one on LVT maybe start a separate one?

Why do you think Labour will never do this?

Because it makes sense but against ideology.

Let's take two single people, both own their houses which are the main parts of the estate. For simplicity let's assume neither will pay care costs.

Person A - lives in e.g. NE, house worth 499k. No partner. IHT is zero.

Person B - lives in London, owns identical house, but worth 1m. IHT is 40% x 500k (above nil band) = 200k.

With new 10% flat rate Person A will pay 50k, Person B will pay 100k (well, their estates will pay).

HMRC will take much more in tax because there are many more As than Bs.
But voters will scream how unfair this approach is because "the rich" will pay less.

What they fail to realise is that people who are to be hit with significant IHT will take steps to avoid it, e.g. Person B downsizing and gifting early, so IHT=0 for them.

And millions of voters who expected their inheritance with no IHT to pay will now have to pay something. So no, I don't think Labour will do this, they are much more likely to introduce this levy and keep IHT, or rename IHT as levy but make progressive to keep the same rate of 40%, so everyone will end up paying more.

ETA: it's a classic example of less tax on broader base brings much more. If you look at our current income tax and and cliff edges - it drives all wrong behaviors and encourages people to work less. It also creates a very risky situation of top 1% paying 30% of all income tax, so some slight shift in behavior leads to significant consequences. Make it more equitable and you'll get more money and boost productivity.

i think it makes sense

It’s perfectly in tune with Burnhams ideology

He is staunchly against the unfairness surrounding care home fees and believes everyone should pay

He is staunchly against the unfairness surrounding care home fees and believes everyone should pay

"But of course wealthy will pay much more" - this is his quotation. So everyone will pay but there won't be reduction of IHT in its current form.

We don’t know the intricacies but it’s fair to say at this point

he wants everyone to pay 10% so they don’t pay care home fees. By its very nature someone with £1million will pay more than someone with £100k.

The 10% based on the current cost and level of use will bring in more than it costs
of course I would imagine use will increase. If it does There’s still a buffer zone.

Hes said he will scrap the current IHT
Whether he introduces something else extra for larger estates , we don’t know

I genuinely do not know anyone who would rather have 💯 of a small estate - than 90% of it and properly funded care and local authorities for all.

it makes no sense to me (I’m a HR tax payer as are almost all of my friends and family) none of us would quibble about ten % less of something - if granny was well looked after and we got the potholes locally filled.