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!

It affects such a small amount of people that I'm surprised there's so much angst about it .... unless they aren't really clued up on it.

I do think it's unfair for single and/or unmarried people as they don't benefit from the personal allowance ... but when my in laws died ... FILs allowance went to MIL (325K I think), then when she died her allowance was put in place (another 325K) ... then my DH inherited everything as an only child and I think his allowance was £300K ... so basically you could inherit a million quid before paying 40% on anything over that. It's pretty generous IMO.

Not that their estate was worth that! But hypothetically.

When you boil it down to the bare bones OP, it's government theft. Maybe make it optional - I'm sure the people who agree with it will be lining up to pay! (Not).

If you do not wish to leave anything to your children that's fine. But I do - I want them to have every available penny to improve their lives after I'm gone.

There are lots of issues here. I think that are people who consider that they have worked very hard throughout their lives and feel that they should be able to pass on what they have saved. Some very elderly people will be passing on savings directly to their grandchildren which might enable them to get help onto the housing ladder or with childcare costs. I think that other people seem to think that they have some form of entitlement to their parents money and are put out that some of this will go to the tax man. Also I don't think that people understand how inheritance tax works and think that there will be tax due when the estate left won't be large enough to pay any tax on. Some elderly people that I know are anxious about giving money away as they may need to use this for care costs.

Do your children not use any of the services that tax funds though? Schools, doctors, hospitals, roads…?

People talk about HMRC and ‘the tax man’ taking their money as if they take it and spend it on ice cream for themselves, rather than essential services which we all use. (I appreciate there are inefficiencies and public services aren’t perfect but that’s a different argument.)

@shortsaint ”you are PAYE, yes, perhaps you have a case, but the richest people I know have businesses / jobs whereby they know the tricks. Then they pass it on. Those kids haven’t done a thing (and have probably benefitted from their parents wealth in other ways)”

Can you’d describe these tricks? I pay myself a mix of PAYE salary and dividends. On my dividends I pay 25% corporation tax then 39.5% dividend tax, so it’s not quite the money-spinner I think people imagine.

The only ‘tricks’ really available are the odd bit of salary sacrifice / pre-corp tax pension contributions / cars and bikes, using your annual ISA allowance - but these are all minor in the grand scheme of things. They could get CGT on selling their business - but then of course, no business!

The only ‘trick’ these people will have is having generated enough capital to invest that it churns off an income stream, beyond earnings from their business.

Its nowhere near as easy as people think to avoid or reduce your tax bill really - the methods to do so are very well known, and the reductions they offer are generally quite minor.

I think this is a relatively new issue. Apart from the landed gentry very few working or even middle class people received significant inheritances.

I’m not bothered what happens to any remaining money after I’m dead. I don’t have children though so maybe that’s the difference. I do have a step-son but he will inherit from his dad and then again from me if his dad dies first. However I don’t mind if some of it goes in tax.

Of course some of the wealth has already been taxed but I don’t really see that s a strong reason against inheritance tax.

i think it’s fairer than taxing all younger people more particularly those from backgrounds where they have no hope of an inheritance or other financial support as young adults.

Let’s not lose sight of the fact that…

…… less than 5% of estates are liable for inheritance tax!

If you are worried about inheritance tax please dont move to Spain. If you are married and one of you dies you have to pay inheritance tax on the 50% value of the property that the deceased owned.

You have assumed I’m averse to paying any tax, I’m not. I just think the tax paid should be proportionate and fair.

My tax funds my families use of all these services, and probably several more families too.

It also funds services I am not allowed to use, like childcare hours. That I find difficult to swallow.

I pay massive amounts of tax every year. That the government will then come for 40% of my assets… I’ll be trying to avoid that, yes. I’ve more than paid my ‘fair share’.

I'm pissed off about my pension potentially being taxed harshly when I die.

I'm self-employed. No employer contribution and just the tax credit. Everything else is my savings. The pension is there in case I need care or have other needs (adapations of the house or car, for instance).

If I manage to die without needing care, after my husband has died and my children are my beneficiaries, it will be taxed at 40% IHT. If I die after I'm 75, my children will also pay income tax on any withdrawals they make, up to 45%. This effectively means a very large part of my pension could taken by tax.

So you bet that we're now taking advice on how to avoid as much IHT as possible. Our estate will fall into the IHT bracket, to a large degree because of our house, which is modest but in the SE. We are comfortable but nobody would look at us and think we are really wealthy people.

£500,000 is not taxed.

It’s a growing issue due to the wealth of the baby boomers (and our old friend, fiscal drag).

A third of pensioners live in a household with >£1m in assets. There are 700k homes worth of>£1m in the UK.

But of course - most people try to avoid paying it.

I am a net contributor and hope to continue that way. Advanced rate (Scottish) tax payer, child in private school and work provide private health insurance. I have never claimed benefits. My DC is ND and I worry about their ability to live and work completely independently and my only wish is that I leave behind a roof over their head that nobody can take away, and a bit of money as a safety net.

For me it’s the fact that it’s yet another tax that punishes the middle. A £500k net worth isn’t a huge amount in 2026 yet you’re paying the same percentage tax on that someone with an estate of £30m would pay. That and the fact that it’s money that someone has already paid tax on, they should be able to leave it to who they wish.

This thread has really helped me realise why I feel so uncomfortable when people are being so against it.

1. I work with vulnerable people including care leavers. My kids, in common with probably of the kids of people on this thread, have lots of advantages in life from having engaged parents. It seems icky that these vulnerable young people can bust a gut to get out of some shitty situations still to find that the playing field isn't level when they hit middle age.
2. To my mind I can either have an asset or give it away. My kids are still kids and I'm paying off a mortgage so I've not given them anything yet but chances are I'll help them out in their early 20s so I'm not entirely levelling the field! Inheritence feels like wanting to have the asset and also give it away.

Why should certain people get rich just because their parent dies with money instead of in poverty?

Basically if you are in the small bracket that have to pay inheritance tax then you are in a very fortunate position and won't be pleading poverty any time soon.

You say ‘why should certain people get rich just because their parent dies with money’… but then also concede you will aim to give your children money to help them buy a house…

… it’s the same thing, isn’t it. Parents want to help their children.

It’s not a level playing field, and no amount of social engineering will stop parents helping their kids.

Personally, I’d say the first £1 million pounds (if you’re married and own property) being tax free is fairly generous, compared to say income tax where only the first £12.5k is tax free.

It’s not 40% of your assets, it’s 40% of your assets over £1 million.

Only 4% of estates pay it. It really affects very few people, and those who it does affect are the wealthiest, and IMO it is fair and proportionate.

If they stop doing it the tax will have to be raised in a different way. Everyone paying more income tax? Higher VAT? These will affect far more people who can far less afford it.

The threshold is outdated. One bedroom flats in my area are over 325k so it’s not just rich people whose estates are caught. The tax due on the estate has to be paid within 6 months so if there is no cash to speak of then you have to pay the tax yourself and hope you can sell the property fairly quickly. Which won’t be the case if the relative is in eg a McCarthy & Stone flat!
I don’t have a problem with IHT particularly but think there should be some more time with paying it in the above situation, or at least a charge put on the property if there is no cash to speak of.

"Why should certain people get rich just because their parent dies with money"

Because my hard earned property is mine to give away to whomever I choose! It belongs to me, not the government!

Also, this statement makes it sound as though your opinion is coming from a place of envy. I can guarantee those not opposed to IHT are the ones unlikely to be affected by it.

I am ok with it in principle, but think the starting level has not kept up with the rise in property prices, which means twice as many estates are covered. It should be set so it's the top 3% or so which is how it was intended from the start.

I’ve no idea why people have an issue with it.

If my parents both died tomorrow, my sisters and I would probably get around £700k each once you’ve taken IHT out. The idea that I’d complain that it should be more is insane to me.

(That’s made up of the £1m tax free that a married couple can pass on free of tax if the estate includes a home being passed to their children, plus 60% of the remaining estate)

@GazPacho79 "If you do not wish to leave anything to your children that's fine. But I do - I want them to have every available penny to improve their lives after I'm gone."

It's often spoke about on here. Wouldn't you want to improve their lives now and get the pleasure from witnessing it, rather than waiting till you're gone?

Obviously, I don't understand your personal circumstances but I think I would rather be disbursing it throughout their lives.

n.b. no wealthy parents here. Modest property and small savings to be shared.

Wrong! As I stated above, I’m likely to affected by it and still think it’s a good idea.

As it stands I could inherit £333k from my father tax free. I really wouldn’t begrudge paying tax on anything over that.

I meant inherit!