To not see the problem with inheritance tax

[AgaPanthers]

"Millionaire lingerie boss Michelle Mone has called for inheritance tax to be axed to stop the government spending her money when she dies."

Surely it's better than the government spending her money while she's alive? I mean they have to get their hands on people's money one way or another, and if anyone doesn't need it, it's the dead.

"I work really hard every single day - like a lot of people - for my children and for my children’s future,’ she told BBC 2’s Newsnight.
‘I want them to have that little nest for their future and for their children, and I don't see why I, others should work extremely hard, pay your tax and then when you die it is like a double whammy."

I work hard for my children too, so that they have a good education and can make the most of their talents. But I don't really see why my grandchildren, for example, would need to receive my millions (if I had any!) untaxed.

Others seem to feel the same way, giving to charity www.news.com.au/finance/work/tycoons-who-wont-give-money-to-their-children/story-e6frfm9r-1226702468883, rather than enabling several generations of progeny to be idle wasters.

For the record, the IHT rate is 40% above £325k, but for a married/civil partnered couple, the allowance is transferrable, so a married couple can leave £650k (which is 32 years labour at the average wage.) entirely tax free to their children.

[Birdsighland]

I think it's interesting how many people say that property paid for out of taxed income should not be allowed to be transferred to a persons relatives after death according to their wishes without being taxed separately and heavily again because it fosters inequality and the taxes pay for public services. Surely this is equally true for any transfer of income or benefit from a parents income in any guise from a parent to a child while the person is still alive.

There are many parents (most) who help their children out financially or buy them things when they are past 18 years of age. Letting them live at home, using your car/washing machine, feeding them, buying a t-shirt, benefiting for winter heat is all helping financially. Should those recipients have to declare everything and pay tax on it as benefit in kind. Just because their parents are alive, should their children benefit tax free from these gifts. It is not just inherited wealth after death that gives rise to inequality of life chances. As people under 18 also pay inheritance tax, maybe support over a certain amount for your children should be looked at as well. That holiday in Cornwall is definitely a benefit in kind. Or Mandarin lessons for them paid for by you. This is paid for by the same taxed (hopefully) income as the mortgage repayments are made.

The law does not treat people equally. Lots of people are given exemptions for various reasons and can benefit from various schemes and loopholes the state does not close. Their tax would also pay for state services.

I think it's the ordinary person who will be the one to pay the inheritance tax on a property that was bought on borrowed money (with interest) that was paid for on income left over after tax. Maybe they won't have enough spare income left in life to help their kids out as they would wish.

I don't know if it would be unfair if there was no trust, scheme, ferreting away or royalty beyond it's grasp. That is different from threshold though. Have the thresholds for inheritance not been raised in donkeys years so it now hits people it was never designed for?

I heard an idea of a universal payment to everyone mooted. Then any and every income and benefit above this taxed. For everyone. I thought this was an interesting idea. The 'each according to their needs' would have to be sorted out though.

[Viviennemary]

I think it should be raised to say £1m for a married couple. Which would take a lot of families out of it altogether. And I don't really agree with most people who have money can avoid it altogether. A friend of mine says she is signing her house over to her DC's. I'm not an expert but I don't think it's quite as simple as that.

[fayrae]

It certainly shouldn't be as high as it is, or levied on estates as small as it is. Most people with money will arrange their affairs to avoid it, anyway.

[tryingreallytrying]

It's not true that all income was taxed the first time and therefore should not be taxed again on death.

In practice, the vast majority of inherited wealth now will come from unearned gains in house prices. Why on earth shouldn't that be taxed???

[Kendodd]

Well guess who on this thread isn't likely to be inheriting much.... Easy to give away when it isn't YOUR families cash.

I'll be hit by IH (twice, divorced parents) and so most probably will my children, and I don't just have one child, the money will be divided by three. I'm still in favour of it and think it's about the fairest tax around. I would rather my children pay tax on a massive great windfall they have done nothing to earn than have to pay more on the money they work hard every day to earn and struggle to make last till the end of the month. Plus I think we should all (including my own children) stand on our own two feet in life.

[CelticPromise]

The thing is if you own your home in London you're not necessarily ' rather modest'. If you bought recently you must be well off. If you didn't you have benefited from untaxed capital gains. I have sympathy for the unfairness of the double band and would abolish it. Perhaps there could be a presumption of a life interest for anyone living in the house.

[merrymouse]

That's what I mean - its not so much the rate or the threshold, the problem is that current rules don't deal fairly with situations that aren't Gladys and Herbert dying in their 80's after a short illness.

[merrymouse]

"families of rather modest people who happen to live in London will lose their homes"

Depends on the situation.

I think the assumption is with inheritance tax that a married couple live together till old age, pass their estate to one another tax free, then benefit from a double tax threshold before passing their estate onto their grown up self supporting children who have their own homes. In this case there would be no tax on an estate that was mainly made up of an average London house.

Assuming an estate of £1,000,000, there would be tax of 40% on£350,000. This is £140,000, but the heirs still walk away with £860,000.

Clearly this is not the case in a situation like Teeb's. Maybe the problem is not so much the rate of IHT, but that it doesn't deal well with people who fall outside the normal assumptions.

[Minnieisthedevilmouse]

Well guess who on this thread isn't likely to be inheriting much.... Easy to give away when it isn't YOUR families cash.

[merrymouse]

It's not London that's fucked up. What's fucked up is that even with smart phones, Skype, the internet, etc. etc. etc. most of the jobs are in London, hence people living in tiny expensive houses on the outskirts of London rather than somewhere with lovely cheap housing but no work.

[AgaPanthers]

More proof that London is fucked up.

Oh wait, no let's cut taxes instead.

[PlumProf]

Sorry, on doing further research, I see I fell prey to an urban myth about the costs of administration of IHT Perhaps I am merely 30 years out of date. It is (?was) certainly a common belief amongst tax professionals and maybe there is some truth in it if you include the money spent by individuals on tax avoidance, but on the whole it is wrong:

Receipts were about £3 billion in 2012-13 www.hmrc.gov.uk/statistics/inheritance/table12-1.pdf

I haven't tracked down the costs of admin but can't believe they are anywhere near £3 billion, even though that is only about 0.18% of GDP.

Anyhow, this is an interesting paper:

www.grant-thornton.co.uk/pdf/Grant%20Thornton%20IHT%20report.pdf

There is a government white paper on IHT reform that is also well worth reading (which also recommends exempting the main residence) but I don't seem to be able to link to it

[worriedsick100]

TheDoctrineOfSnatch - I think in trust and not on trust though is done as a bare trust I think so no heavy taxation.

[TheBeautifulVisit]

It isn't an easy ax to avoid if your main asset is your home and you live in it. All those double trusts with IOUs loopholes have been closed.

It's not easy.

[TheDoctrineOfSnatch]

True. I'm not sure if the PP meant "policing IHT schemes" or simply "collecting the tax" when she talked about cost of collection.

Shall we talk about the weather till she comes back?

[merrymouse]

The more money involved, potentially the more complicated the scheme and the more likely it is that the legality might be subjective and the scheme challenged.

However, again, I'd like to see evidence that the cost of administration is greater than the revenue from IHT.

[TheDoctrineOfSnatch]

Oh, I see. But buying IHT products is as legitimate as buying an ISA so I don't think there's an admin cost for HMRC checking those (though they may check the schemes when they are set up)

[merrymouse]

I think the idea is that is an easy tax to avoid legally. Without seeing figures you don't know though.

[TheDoctrineOfSnatch]

I'd be kind of surprised by this given deaths have to be officially reported and wills officially lodged somewhere and solicitors are usually involved.

Unlike undeclared cash in hand work, say!

[merrymouse]

"IHT costs more to administer than it brings in". Do you have data that shows this?

I suspect this might be true but is there actual evidence?

[PlumProf]

Herc
"The shortfall would have to be made up somehow"

^ nope. IHT costs more to administer than it brings in. It is a daft tax for now. It needs reform so that the rich pay it too, or abolition.

[merrymouse]

teeb there is a charity called taxaid - tax professionals volunteering their time - might be worth contacting them.