What are the Tories thinking with insane £1,000,000 inheritance tax threshold proposal for family homes?

[Figmentofmyimagination]

It's almost as if they have completely lost their way.

And because my dad is "lucky" to have a home in the SE, he is also "lucky" enough to have to pay for his carers to visit 4 times a day due to the value of this asset.

If he hadn't scrimped and saved to buy and to maintain his property but remained in his council house, the cost of his carers would be paid by the council.

It doesn't seem fair that he's not even allowed to leave his property to his children without the government taking a huge chunk of the value.

OnIlkley, I find that argument incredibly small minded.

Yes, someone could sell their home and buy elsewhere, but why should they? Just to avoid paying tax on their own home when they die? You don't see the injustice in that?

It has been said many times on Mn that it's unfair to expect people to move because they've stopped being given housing benefit for spare rooms that they don't need, and the point is made that they may have family, support systems, children at school etc. All valid points. Why then do those things not matter for someone who happens to live in an area where house prices have risen?

I just made this point on a similar thread, it fits here too

is it really fair that a deceased person who lives in the south east has to pay tax on a two bed house they bought 30 years ago, but a deceased person in the north east gets to leave their two bed home that they bought 30 years ago to their children without paying any tax?

Why is one people allowed to leave their family home to their family, but another person isn't? Both have done exactly the same things in life, expect one happens to live in an area that has seen increases in property value and the other hasn't.

I was given 10 days to clear my Dad's council flat which doesn't sound too bad but when you live 250 miles away it isn't easy.

Like others this announcement has made up my mind as to who I will be voting and it won't be conservative. Not that my vote matters a jot, I live in a very safe Tory seat where this policy will go down very well.

I think this is one of the subjects where MN opinion doesn't reflect RL opinion. I don't know anyone who does not support the raised thresholds in practice (and I am not in London or the SE).

My grandfather was an electrician who bought a family home in N London in the 1950's. He would never have considered himself "rich" - bought everything in the sales, shopped at Costco, no foreign hold, clapped out car. He had no idea that his house had increased in value so much he was liable to pay IHT. It makes me sick to think of his estate handing over 100k to HMRC when he could have used that money to have a happier, comfier life. IHT was intended to only capture the super-rich and there has been drag for years (like HRT) meaning more and more people get scooped up in it.

FWIW I also agree that higher taxes would be more palatable if they genuinely led to better services (health and education) but that never seems to be delivered, even in more plentiful times. Wanting to help one's children as much as possible is entirely proper and should be encouraged imo.

Is it fair that people in the south east are wealthier on a whole range of measures than those in the north east?

Surely whether you can inherit "the family home" depends on the lottery of whether your last surviving parent needed to pay care home fees.

The scenario of a young only child inheriting and being able to afford the cost of running a £1m property but not to be able to cover the IHT (perhaps with the life insurance taken out by the parents) is pretty rare.

I'm frankly amazed at the number of people on MN who seem to think all money at least that belonging to people richer than the rightfully belongs to the state with as little as possible of it handed grudgingly to the individuals in question to spend as they wish.

The deceased person doesn't pay the tax. The nil band is the same for all, so if the people in the North get their inheritance tax free, they are inheriting within the nil band. If the people in the south have to pay some IHT, they are inheriting above the nil band. So they are getting everything the people in the north get (and maybe more, up to the threshold), PLUS 60% of any excess over the nil band.

Yes, you can downsize when your children leave home, but people shouldn't feel they have to do that to avoid paying tax when they die.

People shouldn't have to do a lot of things - children shouldn't have to care for their parents, schools should have resources to educate children with SN. Families with children with disabilities shouldn't be forced in to poverty. Yet these are all things that we have been told can't be helped because times are tough.

Yet apparently, an additional £175K 'family home allowance' is necessary, not just to benefit people who only have a £325k threshold, but also an additional £350K for people who already benefit from a £650K threshold. The million pound house could already be the 'downsized' property, the adult children having been bought houses years ago, yet apparently the “most basic, human and natural instinct” of parents to provide their children with million pound houses, if not food, must be protected.

I have no idea whether this allowance can be applied if you are the 50 year old disabled sister of somebody with a £400K maisonette.

For full disclosure, my parents do live in a very expensive part of the south east and I would benefit from an increase in the IHT threshold. Doesn't mean to say I can't see that the 'family home allowance' makes no sense what so ever and is a ridiculous attempt to buy my vote.

You know what would help my children to buy a house? A sensible property market - as far as I can 'the family home allowance' would only make things worse.

What an odd "argument", ptolemysneedle.

Is it fair that a person living in the south east who bought a house 30 years ago can retire to the other end of the country, buy a home there to leave to their children and have a huge lump sum to live off, but a person who did exactly the same things in life in the north east can't?

BTW, whenever it's put that way round, the southeasterner is usually described on MN as being superior and clever for having lived in the southeast, rather than having done exactly the same things in life...

But that only works after you've sold the family home, which is what we are talking about. So one family would have the option of keeping the family home, one wouldn't.

It could be said that the southerners are then inheriting less, because they don't get to keep the house, whereas the family up north do.

And the deceased per own does pay the tax, it's just they stop being a person and they become an estate, which loses them the right to decide where their own assets go while they are still alive.

If the beneficiaries paid the tax, then they would be taxed on what they received, not on what the dead person once had.

And people always go on about schools and hospitals needing money but that's pretty disingenuous; so much state spending is frittered on entirely less deserving things.

The state already hoovers up about 40% of the UK's entire GDP. Only a handful of countries hand so much of its citizens' money to the state to spend. And yet despite these gargantuan sums in many case the UK state still delivers frankly underwhelming public services.

And yet given that very much less than stellar spending achievement people really think we should give the state even more of individuals' money to spend?

BTW, I'm perfectly happy for the southeasterner to do just that. I just wouldn't pretend it's somehow "fair".

It's unfair. But much of life is.

it really fair that a deceased person who lives in the south east has to pay tax on a two bed house they bought 30 years ago, but a deceased person in the north east gets to leave their two bed home that they bought 30 years ago to their children without paying any tax?

Yes, absoutely - they have inherited an asset that can be sold for a fortune. Most children would be selling the house anyway, rather than living in it.

The people inheriting the cheap northern house will receive a fraction of those inheriting the expensive southern house when these theoretical properties are sold.

If the estate is above the extremely generous threshold, tax is payable on that amount - the inheritees still most of it and inherit a huge amount of money. Just because some people would choose to spend it on a small shabby property in a riduculously overpriced city doesn't stop it being a fortune.

And it's not a north/south thing either - I would say exactly the same about a three bedroom flat in the north for 750k.

If they bring in this tax cut for wealthy people, it must be paid for by raising taxes elsewhere, or cutting services. How do you suggest it is paid for?

And don't say by making Amazon and Starbucks pay their taxes, because that would require the world wide tax system to change and it wouldn't be enough on it's own anyway.

Is it fair that a person living in the south east who bought a house 30 years ago can retire to the other end of the country, buy a home there to leave to their children and have a huge lump sum to live off, but a person who did exactly the same things in life in the north east can't?

No, not really, but that's for different reasons that aren't imposed by a government. The fact that house prices have gone up crazy amounts in certain areas isn't a result of government policy, so there's only so much that can be done about it. And it's not a reason to let unfair government policy continue.

Manatee exactly.

I'd be very happy to switch from the current system of a whopping big nil band and the estate taxed as a whole, to a flat 40% (or even 30%) on ALL inheritance. No nil band.

Ilkley - they have said where they think they will get the money from (although they haven't properly costed it). And it's been mentioned several times in this thread and in all the news articles I have seen on the subject. Taking away pension tax reliefs for people earning >£150K.

The fact that house prices have gone up crazy amounts in certain areas isn't a result of government policy

Yes it is. It's a direct result.

Gently I would also prefer that to the current system, at least most people would contribute something. Some of the arguments against the threshold are basically "everyone richer than me should pay more".

The fact that house prices have gone up crazy amounts in certain areas isn't a result of government policy, so there's only so much that can be done about it.

Hmm, maybe some kind of policy that took money out of the housing market and encouraged people whose children have left home to move into smaller houses...

If they bring in this tax cut for wealthy people, it must be paid for by raising taxes elsewhere, or cutting services. How do you suggest it is paid for

I think they've said that it will be paid for my cutting tax relief for pensions for high earners. So it looks as though they're taking money from high earning people who have earnt money to fund people getting even more unearnt money, on top of the hundreds of thousands they can currently get.

I don't get it personally, or how it fits with the idea that hard work should be rewarded. Its probably just recycling the money to a similar group of people, but raising the threshold is certainly more headline grabbing.

Taking away pension tax reliefs for people earning >£150K.

Yes - they have been a bit vague about that. Depending on the details the net effect may be a bit 'meh' for many people.