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 think part of the reason people have become more aggressive about inheritance is because it is the only way they can really afford the property that they aspire to, as property prices have increased hugely, especially in places like London.

The "i've already paid tax" crowd are hilarious and financially illiterate - you have not paid any tax on the equity gains of the house. So say you bought a house 40 years ago for £100k, yes you paid the mortgage out of taxed income. If you children inherit the house after your death and it is now worth £800k no one has paid any tax on the £700k increase in value. Also YOU won't be paying any more tax as you will be dead. Estates pay IHT not people.

Also saddened by the language about the "tax man stealing" money. I assume you all use public services and infrastructure. The "Tax Man" is not stealing anything, HMRC is collecting tax to fund public services we all, apparently want to see improved and extended.

I wasn't late 50s; I was 23. I guess I was 'lucky' as I had very recently graduated and only had a small student loan, unlike young people of today who would have been in tens of thousands of student debt in my position. Even so, I most certainly wasn't well off, established and with plenty of spare money washing around.

My DPs also never got the chance to claim a penny of their state pensions that they'd contributed towards in their taxes for many years... but maybe the government should still have been waiting to pounce and take advantage of their early deaths and my early bereavements, eh?

My point is that, in principle, it's fairer to tax the actual gain in value than to tax the asset itself simply because someone has died, especially for assets like family homes.

But waiting to inherit to get on the ladder is not good. Property should be cheaper

More and more people are being sucked into paying IHT because of fiscal drag. The same as the income tax thresholds have been stuck for years while rhe cost of everything spirals. With rising property prices, even if only 5% are paying IHT now, closer to 20% of houses are worth over 500k today.

There is also a taper on estates worth over 2M (yes, yes, I know that is wealthy) so that the nil rate property band gradually disappears so you end up paying even more.

It is hard not to feel slightly miffed at working, saving, paying tax all your life being a genuine net contributor. And then even after death, HMRC still want more from you.

Agreed.

But a lot of people, especially the middle class, seem to see ever increasing property prices as a good thing.

I think a gift of low houses prices for everyone is more equitable than a gift of large inheritances for a select few.

The super rich pay no IHT as they have advisers to make the arrangements. In any event, as things stand, most estates pay no IHT. Between them, a married couple can pass on up to £1 million to children without an additional tax burden. More people will be caught as from next April when pension pots will be added to the value of estates and taxed accordingly. But who knows what our current PM will do,?

It is hard not to feel slightly miffed at working, saving, paying tax all your life being a genuine net contributor. And then even after death, HMRC still want more from you.

But the vast majority are not net contributors and we have an ageing population. The NHS and pension model isn’t sustainable with the changing demographics so more tax needs to be raised.

@GasPanicagree, ever increasing house prices have been terrible particularly for the young. I don’t understand the mentality tbh even if you can afford to help your dc. If property was cheaper that help could be spent on other things.

@ParsleySageToiletDuckAndBinBags Sorry you lost your parents young, my mum died when i was 16 and she was 46 - life sucks badly sometimes but you can't create tax policy on the back of that possibility.

What you can do is ensure you have made provision for any dependent children or spouses in your will.

I wouldn’t feel so resentful about tax in general if government after government weren’t always pissing so much of it up the wall. HS2, Boris’s partygate defence (and his salary, for that matter), Truss’s lifetime prime ministerial pension, lockdown, war in Iraq, the millennium dome, useless PPE, the pingdemic app, etc.

@Disappointedlamathere is no way the electorate will go for that because as I said many will have to pay a load more tax.

But they can be. My FIL lived in the same house all his life, 96 years. In a fairly good area in London. He was a plumber, like his dad, until he retired aged 55. He had next to no money in savings but the property, even though it was falling around his ears was worth quite a bit, just because of the postcode. Not quite a million but may have been had it been in good condition.

He was working class.

We used to have to write these essays in the 1970s for 'O' level English. Should the state inherit everything when a person dies? Discuss.

For the elderly, there are some legs to this argument.

But younger adults won’t. They’ve not seen these gains, they may have paid large amounts of stamp duty, they’re repaying that mortgage potentially with tax rates of 42-62%.

People get exasperated at the tax man because they feel they pay a disproportionate amount of tax. I find generally people have no issue paying tax for services - but once they’re paying high rates on income taxed largely they become more sceptical about the ‘value for money’ they are receiving.

Yep! And Rishi's £50 million in helicopters.
They are shockingly bad at wasting our money.

IF YOU ARE MARRIED.
If you treat women who have been abused, had partners die early in life, single parents through choice, women who have chosen not to marry differently because of their traumas as if they aren't toeing the line and need to be penalised, of course they will be upset. We already have a patriarchy and an unfair earning system, so why target women wanting to provide for their families in this way?

The people paying IHT will have been net contributors though.

And it is they to whom HMRC comes again with his cap.

Back then I didn't own anything and all my parents had were debts, so I enthusiastically wrote an essay agreeing, now I am much older I don't agree.

@Tel12 I assume most people of modest means won't get caught by IHT on pension pots as they will be using those pots to fund their retirement, as intended. The new tax is to close a loop hole where wealthy people using DC pension pots to avoid tax. The purpose of pension pots is not to stash away tax free money for your descendants, it is to fund retirement.

They really aren't in many cases. These are people who bought family sized houses for peanuts decades ago on a single low paid workers salary and had several children raised by a SAHM who's often not paid income tax since she was a teenager yet suddenly find themselves near millionaires entirely due to the increase in value of their property. Yet they claim they're 'poor widows' who couldn't possibly pay tax on some of their vast wealth.

@MidnightPatrol But most estates subject to IHT will be those of older people. Yes sadly some younger people die but many will not have estates large enough to attract IHT yet - especially if their partner survives and they use the couples nil band.

This is the issue with IHT, many more people think they will pay it that actually will.

Cool. Was he married? If so, he had less than £1 million in assets (which I’m assuming was the case as he had not much in savings) so his estate wasn’t required to pay inheritance tax. So not an example of working class people paying inheritance tax?

@MidnightPatrolwill they have been? My dad was, don’t think my mum was. My aunt definitely wasn’t.