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 like the idea of a flat 10% rate on all estates.

Less incentive to try to avoid it, taxing 100% of estates rather than 5% likely to generate more even before that factor.

If we go from the obvious logical perspective that the government needs income from taxes to fund society, the next step is to ask why people should pay. If it's based on what you earn, then a contribution from those earnings seems very fair - the more you earn, the more you pay. If it's based on people clearly having spare money for supposed 'luxuries' - albeit many of those things are very far from luxuries - it stands to reason that they're privileged enough to be in a position to make an additional contribution. If it's based on your investments having been successful, it may seem only fair that you contribute from that windfall to society.

By stark contrast, the thing that triggers IHT is that you die. It's not about the money; it's about you. It's basically the government being vultures - like the next stage of ambulance chasing, maybe.

If you saw a big strong man walking through the street, wearing a Rolex, his watch would be safe and nobody would try to take it from him; but if he suddenly had a heart attack, or a bus mounted the pavement and killed him, or a loose brick fell from a nearby building and gave him a sharp blow to his head... the single fact that he's now dead means that you have a chance to dash right in there and take his expensive watch for yourself. You didn't deserve or merit it in any way, but you took advantage of his (and his family's) misfortune and seized your opportunity to cash in big-time. If you did that, and were found out, you would be roundly exposed and condemned and treated as an evil pariah; but if the government does that, there's nothing to see here.

As a single parent I am annoyed that I have to pay more than married couples who have benefited from 2 salaries and tax cuts all of their lives while my child is penalised by HMRC who will be taking more from my death than they do for married couple's assets.

Yeah fair enough, I’d be happy with that.

At least then all the people up in arms about paying it would be doing so with good reason as it would actually affect them!

@PaperFlyingFucks I'm doing both. Helping them now, and after I'm gone.

@modgepodge Would you pay it if it was optional? If your answer is honestly no, then you really don't think it's a good idea.

My mother has recently died and she had her own quite small house which won't be subject on its own but she also had a rental flat and a good number of investments so overall we will be paying IHT.
I don't need to live in either her house or her rental flat. Even after IHT we will be left with enough to pay off our mortgage and potentially a small deposit for a flat in our fairly cheap area for both of our DCs (teens who might well not go to university so that seems like the best investment for them).
My DB has already paid off his mortgage and has two adult DCs who all live in the same town as the rental flat. Again, none of them need to live in my DM house so the additional after the IHT is paid the residue of the estate will help them to buy, or we could do a trade where DB takes the rental flat and continues to operate it and the equivalent share of the rest comes to my family.
TBH it has come as a bit of a shock to find out she had so much and it's pretty easy for me to not see it as my money.
I can see that if you are planning your own estate it feels like your money that HMRC is taking.
I see it as not mine yet, and with us only getting older, and two DCs in education, various health conditions - happy for some of my mum's money to go to the NHS and to education.

We got married because of this (I mean wwe ended up having a nice day of it, but still). We paid 50% each to pay off the house, straight down the line equal contributions, the mortgage is paid off, it's ours. If we hadn't married, the housing market craziness means that when one of us dies, the other would have had to sell up and move to cover IT. That's not right.

A lot of people don’t realise how much you can leave before paying tax.
A lot feel it’s akin to stealing but the vast majority of that wealth has come from crazy house price inflation that wasn’t earned.

But it’s only 40% over quite a substantial level.

I'm against it but also won't be effected by it.

The £325,000 per individual (yes I know there are other allowances) has been frozen since 2009. It should be at least £550,000 to keep up with inflation and the average house price having doubled since then, or more like £1m to be the equivalent of the top 3% of estates only which it covered in 1986.

The majority of estates nowadays contain a significant proportion of unearned property asset growth. I’m fine with inheritance tax in general, but particularly fine with this unearned money being taxed. I say this as someone who’s likely to inherit a substantial amount. I do agree a flat rate 10% would be better.

@DeftGoldHedgehoglots of tax bands have been frozen

It's not stealing. It's taking a contribution towards public services that are paid for by taxation. We are constantly paying tax out of money that's already been taxed. Every time you buy something with VAT on it you're probably paying out of income that's already been subject to income tax and NIC.

I agree, OP. At present in the UK a married couple can leave £1m to their direct descendants free of inheritance tax if that includes their marital home. That's a massive amount. I think it should be a lot less, and I say that as someone whose children would get less as a consequence. We had ordinary jobs and bought a house in London decades ago. We have done nothing whatsoever to earn the huge increase in value since then. Why shouldn't the state get a bit of that?

I too don't see a problem with IHT. It's 40% above a very generous threshold (up to £1M when a married couple have a house worth this much) and for the current estates that are paying it, in many cases a substantial amount is on unearned housing wealth that younger generations won't benefit from to a similar degree. So it's a very fair tax, people are still inheriting huge amounts.

I don’t think a lot realise this

Very simple to avoid this though, by either being joint tenants or getting married. Both ways you can easily legally recognise that an asset is shared.m and therefore no tax on transfer.

We tax the successful to give to the others.

That comparison is completely and utterly ridiculous unless you are against all tax, which it doesn’t sound like you are.

It’s illegal for me to steal 20% of someone’s wages. That doesn’t mean that it therefore follows that the government taxing them is just as bad.

But they are mainly successful because they have sat in a house in an expensive area for decades.

But there's also the RNRB so if you're leaving your house to children/grandchildren you can pass on £500k (or £1m for a couple) without any IHT.

I don't have a massive problem with IHT. I work very hard to get my salary and that is taxed at up to 40%. It seems weird to me that I should inherit money which I haven't done anything for without paying tax. I know it's charged on the estate, but that's just because there would be more complexity and avoidance risk if you did it based on inheritances received. I'm not sure I'll be affected by it though as my parents are trying to keep their assets under £1m.

The problem is with the optional question is that I think it’s a good idea because of the amount raised if everyone who is eligible pays and the impact it must have on tax revenue and therefore on society.

If hypothetically every other person due to pay opted out and I was the only one to pay it, my £20k or whatever would be a drop in the ocean and wouldn’t have any impact, and taxes would still have to be raised elsewhere to pay for essential services. Whereas if we all pay, however many millions are raised and the NHS can function and no tax rises necessary. Perhaps I would consider a donation to charity of the right amount instead.

Just being completely honest here, it would be very easy for me to say ‘yes of course I would’ as I’m a stranger on the internet and it’ll never be tested haha.

It’d be like going out for a meal and people only paying if they wanted to. One person pays their share - the rest of the money is still owed on the table and where does the money come from?

Simple in punishes hard work and saving. I always think the opposite, why would you support something that taxes things twice. Would be better to have CGT on death

I don't have a problem with this either. If you want the state to recognise the special status of your relationship and get the tax advantages that confers you have to go through the legal process, which is getting married or entering into a civil partnership. I do think it's right that married couple and civil partners should be able to leave each other everything with no tax payable. I also think if a couple don't want to be married, for whatever reasons, that should be respected too, and it shouldn't be assumed later on that they were effectively married, just didn't have the piece of paper to prove it. Being unmarried has advantages when it comes to leaving property to the children of an earlier relationship. But you can't have your cake and eat it.

Wouldn't CGT often be more?