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

I do think the fact the interest on inheritance tax starts ticking straight away is wrong.

@Snoopymayhemwhich is why I said can…

Agree
i think there will be far less avoidance and assuming
it’s not
10% plus the existing 40% on larger estates

because if someone was taking 50% of mine I’d think twice too.

Thats right. Single person only £500k which isn't a huge amount taking house prices into consideration

I agree. The hike from 0% to 40% is too big and that's what motivates people to spend thousands on setting up trusts and other IHT planning to avoid it. If it was a straight 10%, there isn't the same motivation to avoid it. We need to get rid of all the stupidly high marginal tax rates as they motivate extreme tax planning which is often bad for the economy/country.

But a couple are more likely to have a bigger estate (including a bigger house) than a single person due to two people earning (usually) and needing a larger house. Of course, all based on "average" people rather than the extremes as, of course, they're be some single people with bigger estates than some couples, but we have to work with the majority/average numbers.

That’s why I think the flat % is a good thing, they will likely collect more as less avoidance

Yes immoral and greedy when people are grieving

Not really. They might be divorced. In which case they count as single.

👍❤️

But the other parent may still have another home that the dc can inherit. As pp said we have to work with the majority

In principle I agree with inheritance tax as it encourages the transfer of wealth from the older generation to younger people

Except there is a ridiculously low threshold for transferring that wealth. £3k per parent, including presents, gifts, jewellery you might give away, paying for holidays, helping with rent, a deposit etc etc etc....... Yes, all that IS included in your measly £3k

Yes, I know you can give lots away if you live for 7 years, and I know you can give a monthly amount "out of income", but if it comes from savings or drawdowns, thats not income, it counts towards your annual allowance. For your children, your family, the whole point of doing what you did in life. Funnily enough, they don't bat an eyelid if you pay tens of thousands of pounds to keep them in university.

When the remaining parent dies both allowances can be used

But not everything is included. There's a small gift allowance of 250 pounds per gift so gifts, presents etc aren't included. There's an additional much higher threshold for gifting money for a wedding apart from that

I think a lot of the sentimental items parents might want to gift - jewellery etc, probably does fit within the threshold a lot of the time. Its rare for even things like antique jewellery to be worth huge amounts in terms of what you would get if you took it to a shop. If someone is gifting very expensive jewellery (and it is sensible to do this for sentimental items before you die IMO. It saves posthumous misunderstandings and fights) that tips over the allowance, and they also have a large estate that will insure inheritance tax then they almost certainly can afford the tax because a large amount is being transferred tax aside. I can see it's sort of annoying but it's such an edge case, for people who can afford it, I don't think it should affect the law.

This all, also contradicts another posters argument that inheritance tax will lead to everyone divesting themselves of all their assets.

But then they each have half the estate. So it's exactly the same as one dying before the other where the survivor gets the deceased estate and has 2 times NRB and Marriage transfer.

Joint life, second death insurance policy. Sadly having organised our property, business assets and DC pension savings along the lines established under George Osborne from 2014, Chancellor Reeves has thrown a rather large spanner into the works.

Personally, I don't think anyone should be liable for IHT if it is the home they actually live in. No one should have to face being homeless because of a tax bill.

Trouble is that people would just throw all their money/savings at buying a more expensive home, so that their estate would be exempt from IHT.

In the same way that some people deliberate buy "business" assets as they are exempt from IHT even though they're not really interested in the business they've bought into!

How would they be homeless when they are dead ?

I am on about people still living in the home.

I think this thread makes some people uncomfortable because it exposes the rather unsavoury fact that they believe more tax should be paid, but by “other people”.

Exactly.

I do think a contribution to social care for the elderly should be paid by all tax payers.

I don't quite get who the winners and losers would be here.

Surely anyone who has undertaken tax planning would be exempt from this new 10% tax in the same way as they are exempt from the 40% tax currently. So no revenue there unless some significant changes are enacted to stop IHT dodging. These people aren't going to undo their tax planning which is already done because the environment has changed.

Estates that would pay no IHT before are losers as they now pay 10%.

Estates that did pay IHT before but didn't tax plan would be gainers if the estate went over a certain threshold but greater contributors otherwise if the estate was smaller. That would surely be skewed towards relatively small estates that did qualify for IHT (they would pay tax on the proportion of the estate that previously was exempt).

So it strikes me that the losers would generally be the small estates plus the very big ones that didn't tax plan (which would be relatively few).

Doesn't sound like a very progressive tax to me. The main change in taxation will come from the numerous small estates contributions not the relatively few big ones.

I support the idea in principle, but the way it works out it wrong. The government really needs to come up with a better way of stopping the large estate tax dodging.

A lot of people with estates that qualify for IHT don’t tax plan because they don’t have the means too. All the money is tied up in the house.

It cost money to set up and run trusts for example

@GasPanic

Surely anyone who has undertaken tax planning would be exempt from this new 10% tax in the same way as they are exempt from the 40% tax currently.

Nail on the head. Unless Burnham is going to change tax rules on trusts, extend the 7 year period, etc., which are retrospective changes and highly likely to be contested in court, so will take years to resolve whether lawful or not. Easier to change the trust/IHT laws to change tax rules for new trusts being formed, so a minority of "rich" affected.

It'll hit the "normal" people currently mostly exempt from IHT, i.e. those with estates under £1m or just over, who've previously never had to plan to avoid IHT. Not sure that's really the target demographic as it will make Labour very unpopular.