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!

Your first paragraph…how is it unfair to the person who has paid in??? They’re dead??? They don’t need the money.

Sorry one more thing…if you are being passed more than 325k in cash then you have enough to pay the tax…why would anyone need to inherit that much money.

And that is before the second persons allowance, which would take it to 750k

Then also the house…

You don’t get taxed until £1m is transferred

Just gotta pop this in here. First of all that 325K is spread across the death estate ie what the person owns at the time of death and any potentially exempt transfers that took place in the 7 year period before that.

Also you don't get anything until you pay the tax, you have 6 months. Let me reiterate the executors don't get anything, no cash, no property, nothing gets released until taxes are settled.

I think it was the word transferred at that end. I meant reached. I tried to edit it but someone had already pressed to react to the comment and once they do it removes the edit button.

I wasn’t saying you got a pile of cash then had time to pay the taxes. I meant that inheritance itself can reach £1m before tax would become due.

The thing that I do think is unfair is won’t it increase the private sector/public sector pension divide. DC pensions (private sector) included for IHT purposes but defined benefit (public sector) not included (because there is no individual pot to tax?

If the asset has increased in value (think house, valuable artwork, gold) no tax will have been paid on the appreciation. So when it is inherited the tax is paid. Only 5% of estates pay it.

It only kicks in after a certain amount - I think currently each child can inherit 375k before it kicks in. Obviously the type of home you live in up to death will totally impact if they’re taxed. Average modest families will be ok, wealthier….

Although, those that have the money can afford lawyers etc to tuck it away etc and hey ho…usual story.

Some banks will release funds with a death certificate. Depends on the bank. When my dm died as the executrix I received over £100k before probate was granted.

The beneficiaries are not taxed: the estate is taxed prior to distribution. Who the beneficiaries are is irrelevant for tax purposes unless they residence nil rate banding is being used as the property is left to direct descendants.
It’s not correct to say that each child can inherit £375k before IHT is due.

Exactly this!! You pay tax on earnings, then anything you leave over the IH threshold is taxed again, only this time at 40%. How is that fair?!

The beneficiaries have not already paid tax on the money. They pay tax on money they have not earned. Nobody is being taxed twice. The testator is taxed when the money is earned and the beneficiary when the money is received- each pays once.

What if there aren’t liquid assets?

The tax on interest means you are taxed twice: one when you earn it and again when you receive interest. So on my savings I paid 40% when I earned it and from next year 22% on the interest I earn on the amount I save. That is being taxed twice!

pay from own funds
take out an executor loan
it’s not an ideal situation, given that beneficiaries/executors are still grieving

This exactly!

Key Thresholds and Allowances

• Standard Nil-Rate Band: £325,000 per individual is completely tax-free. 1]
• Residence Nil-Rate Band: An extra £175,000 is added if leaving your main home to children or grandchildren, raising the total individual tax-free allowance to £500,000 (for estates under £2 million).1, 2]
• Spouse Exemption: Married couples and civil partners can pass any amount or their entire allowance to the surviving partner, potentially creating a combined tax-free threshold of up to £1 million. 1]
• Cohabitation Warning: Unmarried partners do not get automatic spousal exemptions, meaning long-term cohabiting couples can face heavy tax bills. 1]

The state has no right to anything we earn.

So how does stuff get paid for then? How does your street get lights, how do we support the poorer in society, how do we pay for schools if people dont pay tax?

A house valued at £1m in today’s market would likely have been bought for £55k in 1985 (which is when I bought my first house). The £945000 uplift in value is immense.

When is enough tax. You get taxed on the money you work hard for. You get taxed on the money you don’t spend. You get taxed on the money you pass on when you die. You literally are taxed from the moment you start working to beyond the grave. Yet some just sit and sponge off benefits.

You don’t get taxed: you’re dead. The beneficiaries are taxed, or not, depending on the value of the estate.

YOUR money is taxed. Have you received any inheritance before?

Yes, I have. How is that relevant?

Then you get my point. The money you received you got less of because the dead persons money was taxed. Not you, because the money you received was less. So you wasn’t taxed, the dead person was taxed. Sorry for your loss

Sorry youre not happy with the Adam Institute
they are highly regarded

the Adam Smith Institute is widely recognized as a leading economic policy think tank, though it focuses on macro and domestic economic policy rather than corporate financial statement analysis or investment research. 1, 2, 3]
Reputation and Rankings

• Global Standing: Rankings from the University of Pennsylvania’s Global Go To Think Tanks Report have placed the institute high globally, including 7th in the world for domestic economic policy and 10th for international economic policy. 1]
• Policy Influence: It has a long history of shaping U.K. public policy, notably pioneering ideas surrounding privatization and market deregulation in the 1980s

I agree
but when I did probate for three members of my family I simply noted

Contents of no monatory value
Three estates and no queries from Hmrc.