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.

So is there a time limit on it the TheBlackRider? Do you have to sell it within X months or is it acceptable to show that you have taken reasonable steps to sell it i.e you have put it on the market. I know there have been periods when expensive houses have taken years to sell and I'm wondering if this causes a problem from an IHT perspective.

"normal working people" cannot go out and buy a 1 m home on say a 50k salary - unless they inherited vast wealth. or they bought the house when it cost half that or much less. or they bought another property at the right time which increased drastically in price ie in south east.

the people sitting on 1m terraced house who bought 9 years ago didnt go out and "earn" that massive capital gain it just happened.

taxing the dead person's estate still leaves plenty cash tax free ie 325k for the inheritors.

remove the tax relief on BTL mortgages.

that will solve many problems by causing drop in prices and a new supply.

Oh ok thanks.

When a person dies, their estate goes into probate. Generally, a solicitor (appointed by the trustees) will calculate the value of the estate, settle any outstanding liabilities and then pay the tax due. Once this has been done, the distributions will be made to the beneficiaries.

Inheriting 'the house' is a bit of a misnomer. The will might be worded in such a way as to leave 'the house' to someone. But if the value of the rest of the estate is not enough to pay the taxes required, then 'the house' will either have to be sold or the beneficiary will have to find the money to pay the tax from somewhere else.

It's more common for people to word their wills in such as way as to leave x% of their estate to this person; or the residue of their estate after small distributions to that person. So the house would be sold as a matter of course to realise the value of the estate.

Agree pausing.

It comes down to what we want - treatment for cancer regardless of income level, a well educated society, well maintained roads, an effective police force etc. etc. and how we are going to pay for it.

There is no magic number that is 'fair' and we are 'taxed twice' or even three times all the time.

Thankyou ladies for some thoughtful answers and yes I agree, it does depend and I also agree that taxes on unearned gains are generally a fairer way to tax. Balancing the inevitable level of self interest with the responsibility of society to care and share for its members is a difficult thing and we will all draw the line in different places.

Pausingflatly that is one of the best summaries of the situation I have read. Thankyou. However I do think some sections of opinion do want to punish people for having more than they do and see anyone they consider rich to have crossed a line between being a "hard working family" and being a greedy, lazy fat cat. Of course it's not as simple as that. There are constant cries for more taxes for the wealthy, but where do you stop? Eventually the milch cow runs dry. The better off should and do pay more tax, but they cannot pay for everything. There is a narrative being developed that a small number of tax payers can fund an ever growing list of demands, and the politics of envy often leads to poor decisions and in itself damages social cohesion.

Re IHT. I think the threshold should be increased as it has been static for some time, but I'm not sure that it is such a vote winner that it's worth the pain of lost revenue and to pay for it from reduced tax relief on pensions seems a bit bizarre to me.

The London house we sold 20 yrs ago for £189,000 has recently sold for £1.4m . The house we moved to elsewhere in the S.E. (which cost more at the time) is valued at MUCH less than that but still well over the current IHT threshold. If I died my dc (all at Uni - but this is still home during holidays) would be homeless as they would have to sell the house to pay the tax.

The reality is that I wish property prices down here had kept at the same level as the rest of the UK, my dc and their friends can't afford to buy down here so they will either have to rent or leave. The ones that haven't gone to Uni are also still living with parents due to the high cost of renting. While on the one hand I would want to wave a magic wand and take houseprices back to 20 yrs ago - on the other hand I got the house as my bit of a divorce settlement. Like many women I tried to keep the dcs lives stable by keeping the family home - but it means the house is my pension.

It comes down to what we want - treatment for cancer regardless of income level, a well educated society, well maintained roads, an effective police force etc. etc. and how we are going to pay for it.

There is no magic number that is 'fair' and we are 'taxed twice' or even three times all the time.

On the face of it, this sounds sensible. Isn't it true, though, that you could defend most any tax on the rich with this logic?

Don't forget Miliband and his family "avoided" £100k in IHT via a deed of variation of a will.
It's not just Tories who are greedy selfish fat cats

I'm with you there op, even as someone who would probably/possibly benefit from this new law. However, I agree that IHT should be abolished altogether to placate the whingers.
Instead, I would say that a spouse or dependent child (under, say 25) should have the right to inherit family home in full (spouse) or remain in it (until 25).
Then each beneficiary should pay an 'estate windfall' tax on anything over say £100k.
That way, none would complain about having to pay tax twice. For the recipient it is unearned income and the dead person won't have anything to complain about.
Obviously would have to be tweaked slightly to allow for disabled children etc, but don't see why this can't be done.

I've worked to earn the money in the first place, and paid income tax
Then I bought a house, and paid stamp duty
Why the hell should my estate then pay out inheritance tax?

I'm far from a natural conservative voter, but the tax should be abolished full stop.

So I'd just make sure no beneficiary received more than £99k, so no IHT would be payable.

Not sure why disabled children should be exempt from IHT either, given that it's an unearned windfall

Isn't it true, though, that you could defend most any tax on the rich with this logic?

Whether or not you can defend it is less relevant than whether you can collect it. As people have mentioned the super rich tend to be good at avoiding tax and if push comes to shove if you tax an activity or possession too far people do something else or own something else and then there is no tax.

Equally, we live in a democracy, not 18th century france and well off people not only vote but tend to have influence.

However, the fundamental point is that you can only tax people with money to spare. You can call a single mum on benefits a scrounger as much as you like, but she still isn't going to have spare cash to fund the defence budget, libraries, mending of potholes etc.

If you are looking for people with spare money, dead people seems a fairly good starting point.

Not sure why disabled children should be exempt from IHT either, given that it's an unearned windfall

Because they are dependants.

Because if it was abolished full stop we would be living in a society even more unfair than it currently is.

Inheritance tax doesn't mean that hard earned cash can't be passed down the generations it just means that some of it over a certain level is taxed. How is that not fair?

ScoOffasDyke I'm not saying anything about exempting disabled offspring, rather, having a mechanism in place that would allow money from parents to be available to pay for their future care - I made it clear that this isn't something that I'd carefully thought out. Am just pre-empting the questioning down this line.

I think this thread has shown a big difference between those, mostly in the SE, who resolutely refuse to see why inheriting a large unearned capital gain can be seen as unfair and those who argue against it.

The argument that inheritance tax could be paid after inheriting rather than on the estate as a whole before inheritance brings a whole new set of problems. Would a high earner pay more tax than a low earner or someone on benefits for the same inheritance? Would an only child pay more in tax inheriting a whole estate than each individual sibling inheriting a share? That seems to me to be a minefield of loopholes just waiting to be exploited

As I said earlier, my main concern is that this, again, will reinforce the property market and economic dominance of the SE and make social mobility even tougher. When my DS was at uni he was offered an unpaid internship one summer to get experience with one of the "Big 4" finance companies. He was unable to accept it as we couldn't afford to pay for accommodation in London for him where his course mates from the SE were able to accept so having an advantage when it came to their job applications. It is very difficult for young people to afford to move to London if they have no family or backup there yet that is where the best job opportunities are to get on in life. Catch 22 which will only get worse

For those who receive it it is a windfall Of course it should be taxed.

I know a couple who will inherit a 1.4 million house and a few hundred thousand when one set of parents pass away. They are voting UKIP and one of the reasons they have given is inheritance tax. Under the current system they will end up with around £1.1 million after tax has been paid but that's not enough they want it all hence their support for UKIP. How is that not greedy? Opposing the inheritance is about all about greed.

And yes, that's up to the individual whether they choose to leave £99k to each of their three children, then £99k to each grandchild and then £99k to Uncle Tom Cobley, then £99k to all. Personally I'd far rather my three children received £200k each * and then each had to organise paying a percentage on £100k of it, but that.

I think this is a far fairer way of doing things.
*Highly unlikely

The more I think about, the more I realise labour is genius.

They have people believing that this tax will benefit "normal" families and take from the rich, but really the exact opposite will happen. It's the "normal" families that will be hit by this tax and the very rich won't pay it because they will have already been able to pass on their wealth before their death - something normal families (whose house value just went up) will be unable to do . So they benefit the rich whilst having everyone believe they are supporting 'nnormal' families. Genius.