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!

I see it the same way as earning money. I receive a net amount after tax has been deducted. As a beneficiary it’s the same scenario except it’s unearned income. I receive it net of tax.

But that’s exactly my point, it’s NOT unearned income to the person who built it. It’s their lifetime of hard work, which was already taxed when they earned it and taxed when they saved it. The government takes a massive cut while you're alive, and then takes one final bite of your life's savings before your family can touch it. That's pure double taxation

But it’s unearned to the beneficiary. Ergo free money to them.

Most inherited income comes from house price increases
which is unearned
So either that is taxed as IHT
or
cgtax which is much more difficult and expensive for Hmrc to run

Agree

Regardless of whether you like or dislike iht, the previous Conservative Govt of 14 yrs who harp on about low taxation did nothing about it. So either they (and the current Govt) are happy about it/don't care/have all the legalities taken care of. Introduced in 1986 by Nigel Lawson in the Thatcher Govt so 40 years gone by and none of our/your elected representatives have done anything except alter the t&c's

But for the beneficiary it’s unearned income.
as I mentioned upthread I pay tax on my income and from next year will pay an extra 2% tax on the interest on my savings. The money I save has been taxed once and will then be taxed a second time with an extra 2% - so as a saver I am taxed twice. This pains me more than IHT!

A family home isn't 'unearned' wealth. Someone had to earn the deposit, pay the mortgage out of taxed income, and maintain it for 30 years. Just because the market value went up doesn't mean the government owns a piece of it. And you're proving my point about savings. Double taxation hurts. But while you're paying a small extra percentage on interest while alive, IHT takes a massive 40% chunk out of the actual capital after you die.

You must be rich now then, lucky you. Most people can't afford to give thier children money whilst they are young as they are paying for their mortgage and daily life and don't have loads of spare cash after. I don't know what planet you are on but you must already be wealthy. It is always the rich idiots that come up with these silly socialist ideas. The majority of people hope to give their home to their kids when they die so they can then benefit from it, pass it on to the grandkids if needs be. Plenty of people rent most of their lives now so would hugely benefit from the sale of their parents home and assets if any left by parents. It could be thier only opportunity to purchase a house. My cousins have just done this as their mother passed they are in late 30's and 40's, were all still renting as they could not afford to buy.

The amount of extra tax I will pay with the 2% is not massive, but the principle pains me! I save so that should anything happen I can manage without govt support and would take nothing from the public purse and my reward for this prudent approach is to pay a further 2% in tax. I am particularly pained as I am paying for my Dd to have surgery privately as the nhs waiting list is 14 months so I pay tax, pay more tax and then pay for the surgery.

I am so sorry to hear about your daughter, and I completely agree that the situation with the NHS waiting lists is infuriating. I’ve waited 10+ years for a diagnosis and had surgery a few weeks ago after 13 months on a waiting list.
But that’s my point…You work hard, save responsibly to take care of your family, and pay your taxes, yet the system fails you when you need it, forces you to pay out of pocket, and then penalises your savings with an extra 2%. It’s the exact same principle with inheritance tax. When the ‘system’ takes a massive cut of your hard earned money your whole life, and fails to deliver, it feels incredibly unfair for them to take one final 40% bite of whatever nest egg you manage to leave behind for your kids

But the deposit etc etc wasn’t paid by the beneficiaries - once that person dies (the one who bought the dirt cheap house, say, or inherited from their family) whoever it passes to has been gifted the money. They didn’t earn it. You don’t earn by accident of birth.

Then by the same logic the government didn’t earn it either. Literally you are stating my point.
Why does the government have more right to that wealth than the worker's own children? You are completely ignoring the person who actually built the asset. A family home isn't an 'accident', someone spent decades paying off a mortgage, paying maintenance, and paying taxes on it. Monetary value at the time is irrelevant. But yes I agree, and thank you for proving my point. The recipient didn't earn it, and the state certainly didn't earn it, but at least the recipient is related to the person who actually did all the work to pay for it.

The govt doesn’t keep the money for itself! It is to redistribute across services to help look after EVERYONE not just those born into wealth.

I have no problem with it at all if it helps sort out the care system. If my children inherit 95% of what is left when I'm gone they're still lucky

lol ok. I’ll just carry on working my ass off for everyone else 😅🤣

I think it’s outrageous tbh, the deceased pays thier taxes, pays the interest on the house, everything they can tax you for, want to leave it too thier offspring and then 40% gets taxed.

I realise that in some ideological circles Adam Smith are well regarded.

No publication, and I write as an academic, is exempt from the fact that articles of lower quality sometimes slip through. Are the Adam Smith publications peer reviewed? That doesn’t guarantee quality but it helps a lot. I would bet they are not. Happy to be proved wrong.

The bottom line, though, is this: the maths doesn’t lie. I am aware of the aphorism about ‘lies, damn lies and statistics’ but as a STEM academic I am confident it does not apply here. The author of this particular Adam Smith article made a fallacious assumption. It skews your basically correct computations drastically.

Whatever AI has to say about the overall reputation of the Adam Smith Institute does not affect this.

And to clarify my point is not even remotely talking about people born in to wealth

That, surely, depends on your idea of wealth. For many (the majority) being left enough to incur IHT is massive wealth. That’s the problem. The haves have no concept of what have-not means.

We could go like Russia or America with huge polarity between doing ok and practically begging. A gift into hundreds of thousands would be amazing, even having paid tax on some of it? We could argue forever over who paid in what and took out what, we can’t use the ‘I worked hard’ line on wealth passed down. WTF is wrong with just not being greedy or selfish (it’s mine, not the Bagginses, it’s my precious - you can only sleep in one bed at a time or drive one car at a time). Maybe we can stop IHT but get them to pay for all their own medical treatment, including cancer and emergency?

But they're not paying it; they're dead. It's not their house any more.

The beneficiaries, who have done exactly fuck all to accumulate that wealth other than exist get some entirely unearned income so they are taxed on it.

Entirely reasonable.

Because it’s already been taxed!
Tax the frikkin billionaires and leave our parents’ hard earned cash alone ffs.

The money has already been taxed. Pensioners on state pensions are being taxed now.
I doubt i will have to worry about iht anymore, because the cost of living and interest rates are so high my kids wont get anything anyway.

I dont agree with it tbh. Whats the point if its just going to be taken off you? My parents told me not to bother saving for old age because ' they' will take it off you - thus was years ago and looks they were right.

To pay for andy burnhurn to have N10 north? To pay the french to watch the beaches? To pay the wages of criminals in the cabinet? To watch contracts being given to friends, the post office debacle, the mess our military is in. Building all over our fields when there are empty shops and warehouses to be converted instead. Cheaper is it? Burnhams builders got the contract?

Its all the politicians faults. All the parties. Over decades. Not fucking interested in excuses - stop selling public infrastrure off, stop outsourcing pensions, stop raising the retirement age to avoid paying pensions but there are no jobs for young people- stop hiring fuckwits like mandelson and paying him 50k as a going away present. Is that why we pay taxes?

Those of us paying nics for years, all that- its a social contract over decades. Now they want our pensions back, our savings back. Its not a communist country, here in the uk. No one wants that, do they?

Do your parents own a house? Has its value increased?

That increase amongst other things is not otherwise taxed.

I don’t agree with your figures. Our house is worth about 9.5 times what we paid for it in 1985