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.

[TheBeautifulVisit]

YABU, very.

[merrymouse]

Not sure of the relevance of siblings to civil partnerships and marriage. However, a civil marriage ceremony doesn't have to include anything about fidelity or love.

A problem with inheritance tax is that by raising it you also discourage people from building up a sum to cover their own care costs. It is in the government's interests to encourage people to save enough money to support themselves in old age.

Tax policy is tricky, even if you aren't a landed gentry MP trying to protect your own pile.

[merrymouse]

Would be great for private schools if IHT were raised. You can spend on your grand children's day to day living expenses including school fees with no tax consequences.

Ban private schools and I would forecast a rise in skiing holidays and music lessons.

[HercShipwright]

Capital is in fact THE thing that separates the sheep form the goats, financially. IHT policy affects everyone, not just those who might inherit or might have something to leave. It determines the sort of society you are striving to achieve - equal or unequal. To abolish IHT or reduce it is to seek to further entrench privilege and reduce or limit equality. It's a question of greed, grabbiness and entitlement. The whole issue will become much more thorny with the new policies on pension pots, too.

[TheDoctrineOfSnatch]

"Not sure of the relevance of siblings to civil partnerships and marriage. However, a civil marriage ceremony doesn't have to include anything about fidelity or love."

Merry, I was thinking about Teeb's situation, or about unmarried siblings who shared a house.

[TheDoctrineOfSnatch]

"Not sure of the relevance of siblings to civil partnerships and marriage. However, a civil marriage ceremony doesn't have to include anything about fidelity or love."

Merry, I was thinking about Teeb's situation, or about unmarried siblings who shared a house.

[TheDoctrineOfSnatch]

"The whole issue will become much more thorny with the new policies on pension pots, too."

True.

[HercShipwright]

The sibling situation, also the elderly child carer of an even more elderly parent should clearly be revisited in terms of tax free main residence transfer. If you're talking a 5 bed house going to one person then that clearly shouldn't be tax free but even then, assistance should be given (probably deferral of tax till after death).

[merrymouse]

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

[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]

"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?

[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]

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

[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]

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]

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?

[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.

[worriedsick100]

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

[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

[AgaPanthers]

More proof that London is fucked up.

Oh wait, no let's cut taxes instead.

[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.

[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]

"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.