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

If true he can fuck right off.

need to make sure the wealthy can’t simply avoid it though.

True
but capital gains on property isn’t taxed throughout your life

Hard to say anything with no details from him (I think the 10% stuff is all just speculation?) beyond “social care levy on inherited assets”.

But in general, I think IHT should be increased massively. And I am someone who, if my parents died tomorrow, would be impacted by it as their estate would be well above the current threshold.

Yes. But adult social care is an enormous financial burden. We still haven't got to grips on how to pay it. Our workarounds are:

1. Underpay carehome staff and nursing staff. Often provide substandard care and with that ever increasing scandals
2. Force older people to sell their houses while still alive to go into care. This creates issues with families/partners. Many older people then resist going into care. It also removes the possibility (or hope) of going back home once "recovered".
3. Families or old people themselves resist having sufficient care because of the cost. Even if they have piles of savings.
4. Older people stay in hospital because the care there is free and centrally funded (rather than by struggling councils) which is bad for them and the NHS
5. The government takes on the cost of care once resources have run down or for people who don't have resources. This costs an absolute fortune and will cost more as time goes on. It also allows private companies to benefit from a huge wealth transfer from the old to them.

Everyone uses their own assets to fund their usual cost of living. That's how the world works. But health care and social care aren't like food where everyone needs (more or less) a similar amount. There's a huge discrepancy and a lot of it is hard to predict and out of anyone's personal control. It's also vulnerable to profiteering via monopolies. Hence we fixed health care via the NHS. Social care is a can kicked down the road and since the lines between health care and social care are blurred it's hurting the NHS.

So the rich would pay less? That doesn’t feel very progressive.

From what I understand, a 10% rate on everyone would raise more than double the current inheritance tax income, but there's two major problems with it:

• The spousal exemption would have to go and that would be extremely unpopular (if it stays, revenues would actually reduce).
• It still wouldn't come close to fund the social care reform that's actually needed.

I'd like to see the 10% rate introduced and then remove the subsidies to Scotland - that would fund social care AND mean we'd have a much fairer inheritance tax system (and just accept the removal of the spousal exemption).

It was Burnham's flagship policy when he ran for leader in 2010

https://www.theguardian.com/politics/2010/jul/01/andy-burnham-labour-leadership-socialist-values

Why would the spousal exemption have to go? Maybe it would go, but I don’t see why it would have to?

ETA - I know you’re saying mathematically it would, but that’s not based on any actual proposed figures from a full policy.

Ok well I don’t think we can use anything from a leadership bid 16 yrs ago as much of a guide tbh.

depends

If ALL estates now pay 10% INSTEAD of 40% over 500k - yes, absolutely. This is likely to generate more than the current take because of much larger base and those who are subject to IHT would not take steps to plan their estates to avoid it, 10% is acceptable.

However, I see no world where Labour would do this, they are almost certain to slap 10% on all estates in addition to current rates. Otherwise the likes of @SeaGlassDreamer will start "but what about the rich". Completely ignoring the fact that the estates have been taxed already, through income, div, CGT and other taxes, and sometime through IHTs of previous generations.

Look, the entire point of these policies is to take more tax, otherwise why bother. So people will pay more, full stop. As always, the likes of Dyson will have their arrangements, so not affected, but "the rich", who are 5-10k richer than you are, will do.

I think removing the spousal exemption would be tricky. If the couple only owned a house it would need to be sold to fund the levy which seems harsh. I can't really see why the income fall that much with the exemption - surely it is just timing difference. When the spouse passes away twice as much would be due.

I don't see why the spousal exemption would have to go. If we're talking about a theoretical 10%, surely you could just add that 10% as a debt burden to the spouse to be paid on death, so the 10% on first estate will become due as well as 10% on the second.

Or perhaps the spousal exemption gets tagged on when the last person passes away

This would alleviate the issue of a surviving spouse having to find the money
So 20% for a couple with the first 10% based on the amount owing when they died and not when the second dies.

If the spousal exemption goes so,I think, would Burnham! A very stupid decision, equalled by Labour removing the WFA

When the last parent dies, the children might have to pay IHT on the inheritance anyway so adding on that would be unfair!

I think IHT should be abolished altogether. Very few countries have IHT and no other country in the world has 40% IHT rate, no other country has higher rate starting as low as 500k (it is extremely low given prime residence and now pension included).

It’s easy pickings so they won’t get rid of it

@JoyousOpalLemur
thank you for sharing the link, I guess this is where I saw 10%.

So as I said above, it's not about replacing the current IHT, it's about adding 10% levy on all estates. As expected from Labour.
So Labour voters, rejoice, the rich will pay even more, but you will have to pay as well

It wouldn't be an add on to the current system

So how would you fund social care?
I get the argument that the assets being taxed have already been taxed through income tax etc. But the whole point is social care hasn't been paid for. You can sell your house upfront and pay it all the a private company. The government can wait till you're dead and pay for it with some of your estate. But it needs paying for. Or we all just jump if a cliff at age 65 to ensure our assets are passed on...

People living longer = people need more care = money needed

I disagree when it comes to massively inflated house prices. We live in London and bought our house over 30 years ago. We have looked after it and paid off the mortgage but the enormous increase in sale value is nothing to do with us and we have in no sense earned it or done something that should be rewarded. Why shouldn't some of that be taxed? It's a windfall.

As it currently stands inheritance tax works like this:

Spouse A dies, leaving everything to Spouse B - no IHT to pay, which I think is fair and should stay
Spouse B then dies. Spouse B leaves the marital home and some money to the children of the marriage. Let's say the house has a sale value of £950k and there's also £50k in savings. That's a big inheritance even if there are lots of children. It's life-changing for a family with just one or two children.

How much inheritance tax would be deducted first? None. Not a penny.
Spouse A could have left £325k without any tax being due. As that allowance wasn't used, it passes to the estate of Spouse B, who also had £325k. So that's £650k tax-free. The Tories thought that wasn't enough and added another allowance for those who are leaving their home to their direct descendants - £175k for each spouse. So that's another £350k, making £1m the couple can leave to their descendants with no tax at all. It's too much.

So it’s 10% of your estate in return for the state paying for your care rather than the current system which is you pay for it yourself if your assets are worth more that £23k (not sure if that’s the exact figure). If I’ve understood this correctly, I can see this being a popular policy.

Why? They might actually end up paying less IHT than they would under the current system as the burden would be spread more widely. Plus they would keep more of their assets if they need care than they would under the current charging system.

They’re selfish fuckers aren’t they?

But also this tax would be on everyone so you think EVERYONE will leave? 🙄