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.

A new Ferrari costs around 100k. A two bed house around 300k.

So tax on a house costing 500k would be the cost of two Ferraris, leaving the person (if two people inherit) with only half the cost of a house.

Btw, I don't live in the UK so this isn't some selfish grab to inherit shitloads without paying tax (I actually would rather pay high taxes and have a more caring society) just a response to the idea that 500k means that someone is living a life of luxury and ease. Laughing at the paupers with no money. Hundreds of thousands of people live in houses that are now worth more than 500k and yet are struggling to scrape by. It is actually quite grim when you look at the cost of housing and realize that even a millionaire can't afford a 4 bed detached home. If an elderly person dies and leaves their house to two adult children, it will certainly help those children out, but if they live in the SE it will be a chunk off their mortgage, if they're lucky, or a deposit towards a starter home, not suddenly living a life of Riley with no worries.

I'm not saying that it isn't a big lump of money to get for "free" but some people seem to think that everyone with a house worth 500k is one step away from lady of the manor,but really that just isn't true. Multi family occupancy is becoming far more common in the SE, and the cost of housing has gone up massively in the last 5 years, whereas the tax allowance hasn't gone up at all.

I live in a two up two down in East London, tiny Victorian terrace. Decent, not amazing area, two kids, work hard, one holiday a year etc.

We do ok but we're not wealthy by any stretch of the imagination.

House next door has just gone on the market for £600k. It's ridiculous.

House worth half a mill BY NO MEANS = rich.

Why is there a common thought process that if you live in a property worth around £1m that you 'must be wealthy already'.
I live in a house worth about £950k. We are not wealthy. We are public sector workers who were lucky enough to buy in London in a pretty undesirable area about 20 years ago.
Our wages haven't increased that much in that 20 years. We have entered the last stretch of our mortgage and will then have to think about saving for retirement - we are 50.
We have an autistic son who is almost of adult age - this is the house he has lived in since he was born.

Are people really saying that our home is an asset that should be sold so that we can pay tax when actually I need that house for my son to live in. Why should he have to sell his family home when we die - it is his home for goodness sake?
Owning our home does not make us wealthy unless we decide to sell and buy something much cheaper. I can't take bricks to Morrissons to buy food. I am genuinely confused at the simplicity of some people's thinking
I definitely agree that those with the broadest shoulders should pay their fare share of taxes (including myself) but I really do think that your family home should be excluded from IHT.

fair not fare. obvs

If 2 people inherit a house and it is split equally they are never going to inherit more than half a house.

You can still buy a family house for under £1 million in a perfectly nice part of greater london although there have never been many detached houses in London.

The problem is supply and demand. More money to spend on houses will just mean people spend more money on houses and more houses selling for over £1 million. There won't actually be any more houses.

Even if we aren't all living the life of Riley, tax has to be raised somehow.

needmorespace, you are in a different situation that hasn't been addressed by these changes because from what you say your son is reliant on you for a home and that situation will not change.

That is not the same as somebody else leaving a house to adult children who already have their own homes and do not need another one. Most people in their 40's and 50's do not need their parent's 'family home'.

sounds excellent

i personally think inheritance tax is an unjust and very unfair tax - you've already been taxed on that house, so why should you be taxed on it again when you die too?

I believe that inheritance tax should never have existed - it would have saved a hell of a lot of old buildings falling into rack and ruin because the heirs couldn't afford the tax bill.

£1m isn't really that high, given the inflation of house prices anyway

You know I can kind of see why politicians just say any old thing. Who cares about the details or whether it makes sense or not?

Are any of the offering free chocolate?

Person A dies, and has an estate worth £1.3m
Person B dies and has an estate worth £1.3m

Person A lives in a rented apartment, and their estate consists of gold bars, rare stamps, and shares in utility companies

Person B lives in a fairly expensive house and has no other assets of consequence.

Which estate "deserves" to pay lower tax?

The Black Rider

You are suggesting that my son should lose his home because that suits your notion of fair. I think it is unfair - after all, I'm guessing that your child(ren) will be able to remain in their home because you were 'lucky' enough not to have to buy in London. Again, I can't pay my bills in bricks. The 'wealth' you speak of is notional - it doesn't exist in day to day life. Our day to day existence is no different to the many millions of people who do not live in the South East. It is a family home relative in value to all those around it. Surely if all those Londoners were to sell up and move to cheaper areas the it would have the effect of driving up prices in those areas as well.

It is not luck of the draw - it is where we grew up and where we work and have family. Are you suggesting that we should move away from my son's support network - or that he should when we die. If we were to sell this one and buy another house in the same area so that he could maintain his network and support, it would cost us the same money (or very little less) - it is all relative isn't it? And we would pay a shed load of stamp duty as well.

I hear what you are saying about being asset rich - but it is our home not an asset in that way. I would be more than happy for house prices to fall to a more reasonable level as London prices are absolutely horrific.

I totally agree that second and subsequent homes should be subject to IHT at a higher rate or that kicks in earlier, but not family homes.

Or that the IHT level should be set regionally but the administration would probably wipe out what the government would stand to gain.

Piglet

Maybe a simpler one is person A and B are next door neighbours. Each had a house worth 800K and no other assets. Both of these people were hard working individuals.

Person A lives in their house and dies suddenly.
Person B has a stroke and has to live in a nursing home. They sell their house and spend 100K on nursing home fees before dying at 90.

Person A has an estate of 800K (which includes the family house)
Person B has an estate of 700K (Which is savings in the bank)

Why should person B have to pay more inheritance tax than person A?

merrymouse
Yes, you are right - our circumstances are perhaps different but we would still be caught in the IHT trap.
I totally agree with paying taxes. I totally support the fabric of society being maintained by us all collectively paying our taxes. I have always voted labour and this ruse by the Conservatives would not persuade me to vote for them in a month of Sundays.
But I still think it is an unfair tax that was never intended to be paid by those that live in 3 bed terraced houses in the East end of London.

That the SE is wealthier generally is the cause of the high house prices. To some extent, particularly in London it adds to poverty, but there is plenty of poverty in the north also.

Tbh if the beneficiary(s) wish to actually live in the house the tax could be deferred until the point it is sold. It doesn't mean inheritance tax is generally unfair, however.

I completely appreciate why you would want your son to stay in the family home, needmorespace, but more commonly, wherever they are born, adult children have left the family home long before they inherit property from their parents.

By raising tax from people who inherit large amounts (and in many cases this would be charged at under 15% on an inheritance of £1 million), taxes are raised that can improve public services for people with disabilities.