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 fully agree with you. People don’t seem to realise that it is the estate, i.e. the beneficiaries, that pay IHT. You don’t pay it, you’re dead.
To the recipient, it’s all unearned money so it’s right to pay tax on it. We all use public services, from free childcare to roads, policing and many others that mumsnetters decry as underfunded or insufficient - SEND provision, NHS, education, the list goes on.

I’m happy to live with the possibility of being in the 4%.

So hugely successful but failed to protect her assets which is what those who are rich/super rich are busy doing (or should be). It really is easy to avoid a lot of it but you need to seek the right advice and continue to update that advice. No good complaing about stealth tax etc. After 40 years no Govt seems invested in altering anything except to the Govts benefit

I just googled cheapest average price for three bed terrace nationally and cheapest for three bed in London. Middlesbrough £55k-£70k and London (Barking and Dagenham) £350-360k.

Perhaps - money taken in iht should be ring fenced and a trust / committe with a family member or representative decide on the distribution of funds.

A majority vote would be fine. All done online. The money going to actual organisations. Not ' international relations' but say 1M into hospice care and this is the list of hospices. Or libraries where people can meet, discuss books, read and learn in peace if they want to.

We have the technology not to double up, and check the place isnt private equity owned and the money syphoned off, and we can see the iht money doing good in our communities.

Sounds good to me. And easy to set up tbh. Ive done this stuff before in a small way. Wont be too hard to get some mumsnetters involved with the right skills to make it real :)

The odds are they’ll be in the 50s…they’ll have their own home.

plus they didn’t earn the money so why should they get it? Because their parents worked hard and were lucky not to go into a care home?

I’m in the next town along and no person alive wants to live in the cheapest house in Middlesbrough I can promise you…you wouldn’t be safe.

also I think I’ve missed your point somewhere? Unless it’s a reply to someone else

I think the only fair way to increase taxes to pay for social care is to increase VAT.

A quick google gave me a figure of £34.5 billion spent on adult social care, and a 1% increase on VAT would bring the government up to £9 billion a year.

It is not fair to tax working people more, and raid savings of people who plan and take responsibility for their futures. Everyone consumes goods and services whether you are a millionaire, or on benefits. That way, everyone pays whatever their circumstances. It is on everyone's shoulders.

Christ. How much exactly do you want 'older generations' to pay to subsidise everyone else? After already doing it all their lives.

😂😂😂😂😂
I want to live on that planet you’re on, it sounds great!

That’s laughable. They aren’t subsidizing anyone. They’ve taken so there is nothing left for anyone else

Oh no is it boomers again that caused all the nations ills?

FFS get a grip.

My parents are both in their 70s. My Dad was a miner, then a taxi driver then a FT foster carer. My Mum is still working to pay off her mortgage on the council house she bought.

You need to get a grip.

Or, the government should get the 1.7m people who are able to work and actively seeking work, into work.

between the savings in welfare payments and the increases income tax and NI, the state would be approx 40billion better off per year.

its the single biggest change they can make.

@Mirrorxxx
said increasing the number of people who pay
nog the amount

ie Burnhams 10% tax on every estate with no lower limit

Absolutely - needs to be the focus of the government.

This would be similar capital gains tax which currently is not payable on your only dwelling. However, the increase in the value of a home is not generally a result of ‘hard work’.

Consumption is taxed much much lower than inheritance. And also if you give your money to your descendents their consumption is taxed. So it very much is an extra tax.

Really? That all seems essential?! Paying pensioners who've had their whole careers to save is essential?

I mean just look at the government spending you see. Spending 100s of millions of pounds thinking about building a bridge (not building, just thinking about whether we should)

£140k per asylum seeker

Paying beaurocrats to tell you that you can't build an extension on your own house.

There's also a fallacy that if the thing we want is valid, then the expenditure is justified. We spend more than France on infrastructure, and have worse infrastructure. Surely that means somewhere this money has been poorly spent.

If a 10% IHT rate is introduced it would be regressive. Assuming a married couple with a house die (to make the numbers easy):

At the moment they'd need an estate worth £1025000 before they paid £10K in IHT. If a standard 10% rate was introduced they'd only need an estate worth £100K to end up paying the same amount. Every couple with less than £1.3M will be paying more than they currently do, every couple with more than £1.3M will be paying less. That does not seem fair. Presumably the assumption is that fewer people will try and avoid it and so the tax intake will go up? Still means estates/people who didn't pay before will have to start paying it so all the discussion about paying IHT before the property is sold become more acute for more people.

If CGT is charged on property (and pension pots?) increases at 18% for basic rate tax payers and 24% on higher rate tax payers that's also going to increase the amount most people will pay. But in this case the estate value boundary at which you cross over from being a net loser vs a net gainer will be higher (and harder to determine since the use of accountants to find loopholes will vary).

There are two roles for every tax/benefit:

1. to collect monies for central government
2. to change the behaviour of the public.

What is the purpose of IHT? And how does it do 2 (whether planned or not)? With the change to inheritance of pension pots mean more people will buy annuities again to avoid that? Will reducing the IHT to 10% mean enough rich people will stop avoiding it altogether to make the increase in the pot worth the pain of dragging the other 95% of the population into the IHT bracket? Or since most people assume they have to pay it anyway balance that? Governments are very bad at predicting people's behaviour to avoid tax.

This is my exact situation. I'm single, retired and live with my adult DC in a house that I own in an expensive area in the South East. IHT would be payable on my death and mean that my DC have to sell their home to pay it as they would not be able to secure a sufficient mortgage on their salary. No other assets as pension funds were converted to a small annuity at retirement. Asset rich, cash poor. I think it is much more common than you realise.

Whilst I accept that they could sell up and move elsewhere, the tax is due before they are likely to be able to sell and they would need to move away from their jobs to afford somewhere. All that at a time when they are recently bereaved is just hurtful.

For this reason, I took steps many years ago to avoid IHT completely, and as a coincidence, I will also avoid paying care home fees should they become necessary in my old age as the house no longer belongs to me and would not be considered deprivation of assets as it was done for IHT purposes (not to avoid care home fees) when I was young and healthy.

Reducing IHT to an acceptable 10% and finding an alternative way to fund care home fees really does seem like a sensible plan for any Government.

@FalseSpring If you still live in the house does it not constitute a gift with reservation of benefit for IHT purposes?

Absolutely this

If you are dead, the money is of no use to you.

I'm very pro inheritance tax. I think inherited wealth is one of the biggest contributers to social inequalities.
However, I do understand where those who oppose it are coming from. We have been trained as a society that our job is to 'better ourselves' and uplift future generations of our family. This has always been the case for the privileged. But Thatcher did a hard sell on the ordinary people too. Buy your council house, create a legacy, and your children can leave the WC and be better than you.
People have spent their whole lives indoctrinated with the idea that passing on whatever wealth you can is linked to being a good parent and a success in life.
They have obediently lived in accordance with this, and feel IT shifts the goal posts and 'punishes' them for doing as they're told.
More prosaically, you also get a lot of noise from beneficiaries who don't want their unearned windfall reduced.

It’s of use to my grandchildren and could really help them get on the property ladder. As I’ve already paid tax when I worked and also on my pension it’s unfair to have to pay it again.
I think if this is happening we like others will get rid of it before we die.

That’s the idea, get rid of it before you die.