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.

[GillTheGiraffe]

But you can say that about any tax Gill. It's not an argument unique to IHT

Obviously.

But I was talking about those people who seemed very keen to hand their family's wealth to the Goverenment. The government does not always spend our taxes sensibly.

I don't believe in redistribution of wealth through taxes. I believe in paying a fair rate of tax to provide essential services. So my politics are oviously at odds with the majority on here.

[HercShipwright]

Formerbabe you really can't tell me anything I don't know about how scary it is being orphaned at a very young age and having nothing to fall back on because as I told you it happened to me.

[formerbabe]

I'm not telling you...I was responding to an earlier post where a poster mentioned an unmarried couple where one partner died leaving him with 2 children. It is a cruel punishment for, god forbid, not being married!

[HercShipwright]

The greed of some people here wanting to avoid tax and perpetuate inequality in society because it would benefit them is horrifying.

People who inherit capital (usually in the form of a house which they can sell) are hardly working their arses off. Most of the successful people I know inherited nothing. Most of the rich low yet achieving people I know inherited a fair bit. Go figure. And do they pay income tax. Not much. They don't have to work hard, and the knock on effect is that privilege is entrenched while at the same time, the beneficiaries pay less back to society.

[LongTailedTit]

Dharma ah that's interesting! No, definitely a small working farm, with a large Tudor farmhouse but it can't have been worth more than the land even in the boom. There must have been more to it than we were told!
They were very bitter about leaving.

[GillTheGiraffe]

It would hardly benefit them now would it Herc, because they are dead. That's a prerequisite

[Georgina1975]

Well the provision of essential services is achieved through the redistribution of wealth Gil. Those essential services could not be delivered if, for example, people like me were not taxed at 40% and above on a proportion of our earnings.

That is basic economic not politics.

Does Government waste money...yes. Is there ill-advised expenditure...yes. But the tax is not the problem, it is the people/departments that allocate the budgets. That is why we have the public accounts committee...

[WooWooOwl]

why should the lucky beneficiary of comfortable parents retain a right to something they haven't earned themselves, just because it's a house?

Because the person who bought that house and paid tax on buying that house with their taxed income has chosen to give it to them.

For me, it's that simple.

Once something belongs to someone, it should be theirs to do with what they want. I don't think the government has a moral right to tax it once it's paid for.

[AgaPanthers]

"Why should people not inherit? If I've earned my money honestly, I should be able to do what the fuck I like with it surely?"

Well no. For starters if you earn your money you need to set a portion aside for the tax man, otherwise you will find yourself in deep shit very quickly. (PAYE 'helpfully' deducts this at source to make avoidance harder, but it's the same thing.)

"Surely it's a human trait to want to look after your own, as opposed to want to pay the tax man."

The tax man is not spending your money on booze and crack. It's money needed for society to function.

Of course as a matter of general principle I want to pay the tax man as little as possible, but accepting that I must pay, and pay quite substantial amounts (government spending is £100 billion+ per year), then I need to try and figure out at what point I'm going to pay my share. Personally after death would suit me just fine - I'll keep it while I'm alive though thanks.

[Teeb]

I suppose we all hope for death to be a far away thing that happens at a time when we've decided we'd be sufficiently old and those we love have been provided for as well as making their own roots in life.

[traininthedistance]

So if I have 500k in the bank or a bunch of shares I should get to decide who gets them on my death and the recipient shouldn't have to pay tax? Why? Aren't these capital gains for the recipient? It's the capital gain that's being taxed, not the gift you're bestowing.

If you don't think the above should be taxed, then presumably you think a capital gain on anything else shouldn't be taxed either?

That would end up in a pretty weird situation, if earned income (labour) was taxed but capital not. (Of course, that's the dream of all capitalists everywhere - to tax labour but not capital - but there are good reasons why we might want to tax capital; the most important being that it raises a lot more money than taxing income. If the state relied only on taxing income, there would be hardly any money, to start with; and billionaires would pay no tax whilst people on basic wages would pay it all.)

[CelticPromise]

Yanbu.

I find it interesting that in my experience, the people who are against IHT are generally also of the opinion that those on benefits shouldn't be entitled to get something for nothing. Apparently it's ok to get something for nothing if you're rich...

£325k is an awful lot of money. I don't know how anyone Cab argue that the threshold is too low.

[SirRaymondClench]

why should the lucky beneficiary of comfortable parents retain a right to something they haven't earned themselves, just because it's a house?

Because the person who bought that house and paid tax on buying that house with their taxed income has chosen to give it to them.

For me, it's that simple

Spot on Woo

It's no-one else's business if I want to leave my house to my children. Why shouldn't they benefit from my hard work if that's what I want? I will have paid untold tax all the way along in numerous ways to buy and pay for that house, so why should they have to sell it to pay another tax just because I died?
So many bitter people out there. You sound really bitter Herc.
I know quite a few people who ended up millionaires through their own hard work who came from the poorest backgrounds, and I also know several who inherited fortunes. Neither of them are lazy and all of them have paid tax all the way along. You seem to have it in your head that poor = good/hardworking and rich = bad/lazy. It's bullshit.
As long as I'm not breaking the law in how I earn my money and pay my taxes in life, nobody should have a say in what I leave to my children.

[SirRaymondClench]

"Why should people not inherit? If I've earned my money honestly, I should be able to do what the fuck I like with it surely?"

Well no. For starters if you earn your money you need to set a portion aside for the tax man, otherwise you will find yourself in deep shit very quickly. (PAYE 'helpfully' deducts this at source to make avoidance harder, but it's the same thing.)

Thank you for your rather patronising explanation Aga. Don't you think I don't fucking know this?
Do you actually have a breakdown of what the taxman spends IHT?
Isn't the tax I pay throughout my long working life enough then for the function of society?
I'll say it again, if I want to leave my house etc for my children after my death, that should be my right. After all it is me that worked for it.

[NoArmaniNoPunani]

There are a number of ways to legally avoid inheritance tax so it's only the rich and stupid it affects. I can't think of a group I'd prefer to see lose money.

[SirRaymondClench]

And what are the ways Armani?

[Apatite1]

I'm curious: what are these legal ways to avoid IHT several people have mentioned?

It won't affect me personally, I just wondering because I've never heard of any and am feeling ignorant!

[AgaPanthers]

"When a neighbour died suddenly, leaving her partner to bring up two children under the age of 9 by himself, I can assure you that it didn't help when he lost their family home because of inheritance tax, leading to him also losing his job because he was no longer able to love close enough to central London to enable him to do the shift work (being a nurse). Didn't help the kids either, losing their mum, their home, all their friends. Next time I see him I might ask him what he thinks about IHT"

I don't see the logic of blaming IHT for that. He (or rather her children) would have inherited £325k tax-free, 60% of everything on top of that, and he had a job as well. I don't see how that could force you out of London, there still seems to be enough cash there to remain. There are plenty of places within a night bus ride of any London hospital where you can buy a 4-bed house for £325k.

I'm sure that a nurse working in London worth well in excess of £325k is far better off than the average NHS worker, many of whom live in rented accommodation and basically have a net worth of £0.

After selling the house he would have over £325,000, which would pay rent on a central London property for many, many years, certainly long enough to find a new home.

Obviously the IHT didn't help, but any person with young children working shift work is going to struggle to retain that job after the death of their partner - the IHT is basically a red herring in this story.

[Butterandnutellaplease]

IHT is paid by your executors on your estate and not, as in many European jurisdictions, by your beneficiaries. The amount subject to IHT is dependent upon the value of your estate less NRB available ( plus any reliefs) hence the feeling that one is taxed twice.

Whoever asked about giving away your home - this will only work if you move out as a general rule (cohabiting being one exception). There are all sorts of anti avoidance provisions in place to catch the unwary. I see many people who have fairly modest estates for whom planning is not as straightforward as this thread would have us believe.

[traininthedistance]

SirRaymond but you can leave anything you like to anyone you like. Again, the tax is on their capital gain, not on you. IHT isn't a tax on your money or anything you own - it's a transfer tax on the recipients on unearned capital. And if you want to make your children a gift - simples, pay a solicitor or accountant to help you gift that money legally with less of a risk of incurring IHT.

It's just a fantasy really to say "I wish my children could have all my money without paying tax on it", in the same way that I wish I could have my salary without paying income tax on it because I think I've earned it by all my hard work and why should anyone else have it - but I still don't get not to pay income tax just because I'd rather not, or claim some kind of moral high ground about wanting it!

[WooWooOwl]

The tax man is not spending your money on booze and crack. It's money needed for society to function.

I need to try and figure out at what point I'm going to pay my share. Personally after death would suit me just fine - I'll keep it while I'm alive though thanks.

I'm paying my share already. I pay tax while I'm alive because there isn't the option for me to defer it until it can be taken from my estate, so saying 'I'll keep it while I'm alive' is pointless. Presumably you aren't actually keeping all of your money while you're alive, otherwise HMRC will want to know about it.

So I'm paying my share, my dcs are highly likely to pay their share, we shouldn't be expected to contribute more for the privilege of dying.

Nor should I have to fork out for solicitors to prevent the government taking something that that have no valid right to.

[foreverondiet]

The rich can get out of it with trusts, giving away money earlier. Its a tax for the middle class only. Plus no CGT on death so can leave an asset with a huge latent gain to someone (ie a BTL property) and its only subject to IHT and not CGT as well.

[NoArmaniNoPunani]

Some info here

[NearTheWindymill]

Trusts. Transfers seven years before the benefactor's death.

[SirRaymondClench]

I need to try and figure out at what point I'm going to pay my share. Personally after death would suit me just fine - I'll keep it while I'm alive though thanks.

Why don't you give it all away now, you know, to aid the function of society? Or are you greedily and selfishly just keeping it all for yourself? What happened to redistributing wealth? Or do you not fancy doing that while you're alive?