What's the problem with Inheritance Tax?

[QuickBrown]

Inheritance tax seems to be really unpopular among certain sections of society. Obviously people always object to any taxes, but it seems to me to be the absolute least worst tax, as the dead have no use for money.

Those who object to it or know others who do, can you explain a few things to me? Firstly is the the idea of your estate being taxed once you are dead that you object to? Or is it that you are due to inherit and this will reduce their estate? Or something else?
Also where do you stand politically on other inheritance, for example are you pro-aristicracy and inherited titles?
If you are worried about your own estate being reduced before your children get it, are you someone who has given a lot to your children financially in their adult years or do you expect them to make their own way in life?
Also if you have inherited significant sums, has this swayed your thinking?
I feel a bit out of step with other people's thinking here!

This is what I came here to say. All these quotes saying £1m IHT free only applies to a married couple, and only if your estate is below a certain size. Many people are single.

A relative died single, had failed gifts and paid a lot in life insurance premiums (did you know these count as gifts if they pay out to someone other than the estate? No, neither did we, and it was tens of thousands over 7 years). So most of the £325k allowance was already gone, which meant that everything she left, including the house, was subject to the full 40%. Not everyone gets £1m to pass on. It's not the default.

In the south east, that’s the average cost of a family home now. So it depends on the area you live in.

@TheOcelot but your proposals will also tax your kids more in their life time and others who are not fortunate enough to have parents who can pass on large assets.

How it is not fair for your children to pay tax on an unearned windfall of over half a million but it is fair for people who will inherit nothing to pay more tax in their lifetime so your children can inherit tax free. We already tax income from work too much and income from capital or inheritance too little.

Fairness indeed.

I am talking about myself. I am a net contributor, caught in the 62% marginal tax trap with a lifestyle that really isn't one of wealth. My mortgage has been paid out of my own income but the house value is not increasing.
I didn't get tax free childcare, I don't get child benefit. I pay and pay and pay while others take and take and take.

By the time I die, how much more will be being taken, from a far higher proportion of the population? That is where I am looking to, not the current cohort.

All of this.
That's why.
Some of us are absolutely taxed to buggery and beyond...supporting those that float in or cant be arsed.
I want MY money to go to my kids.

I don’t have a problem with Inheritance Tax. It only affects about 4% of estates, and even then only above a decent inheritable amount. It is relatively easy to plan around and take measure to minimise too (trusts, lifetime gifts etc).

I do understand why some people object to it though. But when people talk about wanting to scrap IHT, I very rarely see any suggestion of where the tax shortfall should be made up from If we are going to be able to fund high quality public services.

Re introducing paid insurance for care.

Younget people are already paying auto-enrolment (5% through PAYE) and student loans (9% through PAYE).

Another insurance scheme for care… they aren’t going to have much left over. The cost of care is huge so it would need to be a not insignificant amount.

Also the optics would be bleak wouldn’t they - more tax on the working age population to fund the elderly.

Hi, @WhatsAWeekend

I agree with you that we need more net contributors.

Concerning your first statement above, on what basis is it concluded that there is a net reduction of 1200 high earning taxpayers?
That assumes 500 more left than entered, yet HMG says that the immigrant population overall contributes net +£3Bn pa to the UK economy. So how is a net loss computed?

More seriously, the Adam Smith analysis is flawed. The number of strict ‘liquid millionaires’ in the UK is estimated to be around 450,000 or more. HMRC says the number reporting incomes of £1M pa or more is around 30,000. There is about one person on earnings of £1M pa for every seven or eight liquid millionaires.

Yet the analysis in the Adam Smith article is predicated on this gem:
‘If, as is highly likely, all these millionaires [who left in a recent year] were all earning £1 million per year ……’

There were 10,800 of ‘these millionaires who left’. If they were all earning over £1M pa, the reports from HMRC of those on such earnings would show a big drop. They do not. The numbers grew after the pandemic and have been more or less constant since.

This report is based on a false assumption. An undergraduate at my university would rightly be castigated for being so sloppy.

Everyone is talking about IHT as a way to pay for social care. However, is it just the case that there is not enough money being spent on social care, or is it the case that the costs of social care paid for by local councils is just exorbitant and it needs reigning in drastically.

For example, on the news a few days ago there was an article about a company called Blue Ribbon who had allegedly abused a man in their care. The young man needed 24 hour care, and 2 carers at once and was in residential supported living.

His single care costs £12,500 a week, £650K a year. That is how much money the company who abused him charged the local council.

Article:
https://www.itv.com/news/2026-07-28/a-sword-cocaine-abuse-inside-nightmare-care-company-for-disabled-people

Whilst I fully agree that this young man needs care and support, that is just too much money on the care of one person. In contrast an elderly person in a care home may cost around £6,500 a month.

The government needs to come up with other ways to support people in the community that does not cost £650,000 a year for one person before they do anything else.

How? The care of this young man is perhaps partly medical. You are touching on the question of where one ends and the other begins, and how the budget should reflect this.

Yes, social care is a huge expense for local councils under current arrangements.

CGT on moving could be fairer in some examples but only if costs (mortgage interest, original stamp duty, refurb, extensions etc) are taken into consideration too. However, sdlt already acts as a barrier to some to downsize, would cgt make it completely unaffordable? Some countries offer alternatives - e.g. incentives to downsize, cgt only on gains not needed to buy new home, portability on tax within a timescale if need to relocate etc.

If a property is in a street where similar properties are worth £100k or £1m, it doesn’t matter if the person paid £50k or £500k originally, if someone has benefitted (on paper) from an increase, they can’t use their “gains” to buy another property (bigger or smaller) at a similar rate to what it was when they purchased theirs.

Re: IHT and a family home, a charge with inflation matched interest plus cgt could be put on it if any remaining family want to live in it - paid when residence is sold. Property isn’t a double tax - it’s more as it’s already been taxed with stamp duty, renovations have been taxed, for many there is a Liz Truss “tax” etc.

Lots of people get extensions because they can’t afford to move! A proportion of those would have rather not had the hassle but couldn’t afford more space any other way!

I’m more in favour of IHT per beneficiary, rather than estate (as per most other countries).

Nowhere near a million. We aren't much over the IHT threshold, maybe not at all.
@MidnightPatrol My proposal was only for those over pension age to pay more by merging NI and Tax, paying a care premium and limiting pension increases.

The way the care insurance works in other countries is that it's paid by older people so the young don't pay. In my post I also said that those over pension age should pay more tax and have lower pension increases. I want the burden lifted on young people not increased.

I think inheritance tax is a useful mechanism to reduce inequality, which is at historically high levels now. People say that they deserve to leave their assets to their kids because they "worked hard for it" - but plenty of people work hard but just aren't as lucky. Maybe their partner died or left and they had to bring up kids alone. Maybe they were disabled due to an accident or injury. Maybe they couldn't buy a house in the 60s or 70s. Maybe they didn't have a job that paid them a final salary pension. Your kids are not more deserving than their kids because you were luckier in the cards life dealt to you. In fact, your kids have arguably had it easier as you've been able to support them through paying for schooling/university, help with house deposits etc. There's a really nice video that illustrates this, google "The Privilege Race Concept".

FWIW I'm from a low income background. I won't inherit anything. But I'm now in a reasonably high paying job, and I own my house with a mortgage I should pay off before retirement, and I have one kid. So I have a reasonable chance of having something left at the end of my life. In my opinion, any inheritance is a lovely bonus and not something you should feel entitled to.

Tax is pretty low in the UK for the level of infrastructure we expect compared to other European countries.

I think the most unfair part of it are the spousal exemption rules, in the sense of a couple who’ve been together 40 years but aren’t married won’t get the transferable nil rate bands. Obviously the easy solution is to just get married but lots of people don’t want to and it seems unfair to have to do so just for tax purposes.

Other than that I have no issue with it. I think it’s reasonable to leave something to your children, which is exactly what the allowances are there for. The average couple have a £1million allowance between them, why shouldn’t anything above that be taxed? It’s wealth hoarding

This phrase 'net contributor' is a very right-wing way of looking at things.

Imagine a society of 1000 people. One of them is very rich, the rest are poor. The rich person pays £1000 a year in tax, the 999 others pay no tax, and get £1 each in benefits and government services (roads, police etc.) and the final £1 of tax goes towards government interest payments.
All is fine. The budget is balance. The society has only one net contributor, but this is not a problem (assume he cannot just leave - maybe the society is a whole planet and there is no space travel).

'Net contributor' is just a measure of how wealthy you are - and if you are wealthy you should pay more.
Also, it only take a few tweaks to government expenditure and taxation for net contributors to turn into net recipients, or vice versa. It is not a quality attached to the person's wealth but is a function of government budgets.

The notion is meaningless.

For many Conservatives there is a core philosophy that you work hard in life so that your children have a better life than you. Inheritance tax flies in the face of that. It says work hard all your life to better your children and the state will redistribute your assets to people who haven't.

I'm just catching up! Lots of good points.
Doesn't tenants in common instead of joint mean that a shared home goes straight to the other party? So you don't need to marry to pass your home on without tax being due. But you can't then ring fence it 50/50 or 70/30, you have to go all in.
I can never get Tenants in common vs joint tenants straight in my head. Have to Google it when I need to.

Joint tenants - right of survivorship

Tenants in common - can pass however you like

I always try and remember it by thinking if you’re joined at the hip, the other person gets dragged along with you (I.e. joint means must be with the other person). Don’t know if that’s actually helpful or just my brain having weird ways to remember things!

Yes I have children. Hence my reference to my growing children - they are still children, not yet adults or even nearly so.
Very much on talking terms, they are great kids.
Yes I have savings.
I'm not expecting to die particularly soon.

No, of course I'm not against all tax. Re-read the first paragraph of my comment that you quoted.

It's more than fair for those who have been successful to contribute accordingly towards those who have been less so, and the accepted way that we do this is by central taxation.

Requiring a share of somebody's success is completely different from circling them after they've died and seeing what you can grab from them.

That's a pretty punitive perspective if not an envious one of others.

Also, UK has the highest tax among g7, and arguably the worse social state bar the us.

@TheOcelot then why are you worrying about IHT is as it seems your estate will barely pay a thing? Seriously life is too short to get worked up about taxes you won't be liable for.

Exactly, I am the second person in my family not to marry who has owned this house (the first was a woman who's future husband died in the war and she never married but treated my grandma as her child so passed it to her). It will have been taxed 3 times to the same family, twice to women who have financially had to fend for themselves while being hit by higher tax repercussions than those who have "benefited from marriage" as others on here say and all of the tax breaks and perks 2 adults in a family get.
If I didn't have this house I would not have had my child. I would have rather had an abortion in this financial climate than try to pay a mortgage for a flat solo and struggle with full time work as a single mum to provide the bare minimum in time after rent or mortgage. If you want women to keep the birth rate up you cannot make them marry just to keep their inheritance intact. China is showing that governmental interventions to encourage marriage and children tend to have the opposite effect.

It's not really different - but I suppose the families who would be hit by a 10% tax on everybody, who wouldn't come anywhere near to the current threshold, would likely be more vulnerable and have fewer options open to them.

It only really fully hit me recently how a large part of the National Trust's portfolio came to be theirs: the old 'death duties'. Yes, we're often talking about huge wealth - and the ways that it was achieved by some of them may well have been exploitative and/or immoral - but the principle still remains that it was families thrown out of their homes (if they didn't have enough liquid capital as well) because the government believed that it should have them rather than the families.

Bearing in mind that these houses ended up in charities - as nothing more than a nice day out for the public - with their value clearly not needed to be realised for funding the running of the country, it does very much seem to come more from a point of 'they shouldn't be allowed to keep it' rather than 'we as a country need it'.

Of course I look after my kids! But I also notice the disparity between what they and their peers have and what others have. I want every school to be one I'd be happy to send my kids to, I want health services to provide quality services to all, I want everyone in safe housing, decent social care for the elderly, and all this stuff (plus defence, roads, etc) is expensive. I think that taxing rich dead people's estates might be the best way to pay for it and I know that it is a contentious issue so wondered if I was missing something.
Lots of people don't like to pay tax, and even less the idea of paying it when they are dead because they want their kids to have everything. But not enough to give it to them while they (the parent) is alive.
I don't think missing out on a proportion of a 6/7 figure estate is going to disadvantage anyone.