Raising IHT threshold to £1,000,000 - because you're worth it...

[Figmentofmyimagination]

There are so many reasons why this change is morally repugnant, socially regressive and economically illiterate, it is hard to know where to begin with this ....

£1m gets you plenty in the south east. It is way too high for IHT.

whatthefuck the threshold is £500k for single person. If you die, your spouse takes your allowance and the threshold when he/she dies is 1million. If you are cohabiting, the threshold remains £500k. The children of two lots of married wealthy parents will potentially be able to have £2 million pounds tax free. Someone correct me if I'm wrong.

Oh I see, so only people with a dead husband/wife will have the 1 million threshold. I wonder what happens if they remarry.

With fewer people getting married and more divorces fewer people will get this tax break.

The children of two lots of married wealthy parents will potentially be able to have £2 million pounds tax free. Someone correct me if I'm wrong.

That is assuming the rare senario of two people both being onlies and none of the four parents needing a care home.

I think it's sense to reward marriage in the tax system as married couples received less state pension or benefits than two singles.

If they remarry, then outlive their new spouse, they get to hand on 1 million again. I think. If you're not married, no extra money for your heirs! Tories want everyone to be married a la 1950s

Complex! It's times like this I have a twinge of regret about not continuing my tax accountancy career (25 years ago). This will be very tedious for most people but the completist in me felt compelled to go off and look into this.

If I've got it right, re-marriage is treated like this.

John dies, leaving half his estate to Mary. Half his IHT threshold is therefore unused and transferred to Mary, because anything you leave to your spouse is exempt from IHT.

Mary re-marries. Her new husband, Peter, sadly also dies a few years later. He leaves 25% of his estate to Mary. The unused 25% of Peter's IHT threshold also goes to Mary.

When Mary dies too, her IHT threshold is:

Her own threshold - £325k at present
The unused part of John's threshold - 50% of £325k (doesn't matter what it was at the time of John's death)
The unused part of Peter's threshold - 25% of £325k (ditto)

So her estate could be up to £568,750 before any IHT is payable.

The principle seems to be that no matter how many times you are widowed you can never end up with more than 200% of the IHT threshold - your own 100% and a maximum of 100% to reflect what was unused by your deceased spouses/civil partners in previous years.

So let's go back to the example above and tweak it to assume that Mary married a third time, to Carlos, who leaves her 50% of his estate.

So now the sums at Mary's death go like this:

Her own threshold - £325k at present
The unused part of John's threshold - 50% of £325k
The unused part of Peter's threshold - 25% of £325k
The unused part of Carlos's threshold - was 50% but Mary's estate can't end up with 125% of the IHT threshold, so it will be limited to 25% of £325k

Mary's estate could therefore be £650k before any IHT is payable.

And while I'm on a roll, here's another worked example using the new tax thresholds.

Ann and Bob are both only children of married parents who own houses in inner London.

Ann's parents are Charles and Diana. Diana dies first, leaving everything to Charles. Charles leaves everything to Ann. Charles's estate is valued at £1m, mostly because of the value of the house. Ann sells the house as she and Bob already have a home of their own. So now Ann is £1m better off and there is no tax to pay at all because the IHT threshold for Charles's estate is £500k for him and £500k brought forward from Diana.

Bob's parents are Edward and Fatima. Edward dies first, leaving everything to Fatima. Fatima leaves everything to Bob. Scenario exactly as above.

So now Ann and Bob are £2m better off and have paid not a penny in tax on any of it. Lovely for them, but can anyone really argue that this is equable?

Thanks Gasp.
No I don't see that anyone could say that is fair, necessary or reasonable. Especially in light of 'austerity'.

And given that Ann and Bobs parents may well have owned those properties for years and so never actually paid that much for them.

I would agree. I do see that Ann and Bob are unusual, and it would be more likely that they would each be sharing their inheritance with at least one sibling, but so what? Why should anybody getting a six figure windfall keep the lot and pay no tax?

Yanbu government should pop the housing market and stop loading people up on debt.

We will more than likely do very well out if this...but it's bloody wrong.

Both sets of parents have worked very hard, paid lots of tax and enjoyed the fruits of their labours.

But we haven't. One day we will get all this for doing absolutely nothing. And even if we pay tax on it we'll get a lot of money for nothing. Why on earth shouldn't we be taxed on it?

I know an Ann and Bob. I must admit it galls that they have scooped nearly £2m by having parents who lived inside the M25 in modest houses that they paid tuppence ha'penny for. The Ann and Bob I know are paying for private schools for their dcs, and are buying btl too.

Those of us whose only income will ever be PAYE will never be able to confer those same advantages on our dcs, however hard we work or rise up the career ladder.

There will be a worse London and everywhere else divide. If your parents are only leaving you a measly £125K house in Crewe you can't compete with Surrey-ites.

For those who are going to benefit from this but think it's wrong - there really isn't anything stopping you from paying the tax you feel you should.....

Of course there isn't but if it's optional how many people will do it?

In my case if we don't have to pay out for care in our old age it's our children who'll benefit, by the way.

If Labour get in at the next election they will reverse the changes. My parents and inlaws are healthy and I hope they live for at least another ten to fifteen years.

I shall have to hatch another cunning plan to get the mortgage paid off.

Well this should be great for me but I still don't agree with it. Instead of taking money off single mothers who are just scraping by why are they doing this when it could have been left as it was. Annoying!!!

Would be good for me personally but I think IHT is a good tax:

1. you pay it when you're dead
2. it taxes wealth accumulation that is outside CGT

The 100% argument I don't think is fair as it is demotivational and would just spark evasion through gifting / offshoring etc.

The "I've already paid tax to buy this" argument is total nonsense given the amount of tax we pay out of post tax income: VAT, fuel duty, insurance tax etc etc.

I'd prefer the govt to top up their coffers when I die (if I've not managed to fritter it away on fast living in my 90s) rather than paying more tax on the way there.

Also an inheritance from ones parents is a nice thing to have but should never be an expectation

to add that in the current climate of austerity a tax break to the wealthiest (which is what this is) is just wrong.

I would far rather have seen a reduction in numbers paying higher rate income tax of 40%. That at least rewards hard work and ambition, rather than chance of birth.

I can only assume the Conservatives are doing some people a favour that they promised, and also know that many left wingers won't really oppose it. Because ironically they often seem to be those most in favour of untaxed inheritance.

Why is it economically illiterate to not re-tax the same income over again?

How do you feel about VAT?

Is it worth pointing out that those who paid tax on the income aren't the same people who will receive the inheritance? Or that in a lot of cases the gain in value of a property being inherited has never been taxed?

No, I'll stick with: how do you feel about VAT and stamp duty?

I am one of those mythical owners of a 3-bed semi in (outer) London. My children and their peers would benefit from such a policy, should I die before it comes into effect.

I still think it's regressive, unfair and fucking bonkers in the context of what else happened in the Budget.

TTWK - I'm working so that I can help my DCs while I am alive, not when I am dead.

Good for you. Me too.

But according the the People's Socialist Republic of Mumsnet, surely that's no better than leaving them an inheritance. They are still getting something they haven't earned and thus receiving an advantage over the kids of poor parents. And perpetuating privilege.

Yes, because people who educate themselves, work hard, are diligent about saving what they work their whole lives for, and try their hardest to instil the same work ethic and financial values onto their children, are the ones who should be punished in society.

Maybe no one should ever be allowed to give anything to anyone else, and all income, savings and property should return to the state on someone's death. A true levelling of the playing field, were only those who educate themselves and work hard enjoy the fruits of their labour, and only for the brief moment while they are alive. Then the bleeding hearts would know that they did not earn or prosper because of their inadequacy, and not because someone was handed the results of his parents' hard work.

Jealousy tends to go hand in hand with the entitlement mentality. We all want as much as we can get out of life, and th more we can encourage the government to give us for free, the leass we'll have to learn to stand on our own two feet.

Problem is, we end up teaching that to our children, and some of us were taught that by our parents, and we can do is envy and covet what those who do not prescribe to our view of the world have, and try to find reasons why what they have should be taken from them and given to us instead. It's called greed and sloth.

It's got jackshit to do with hard work. If you live in London and bought a house in 1955, it's probably worth £1m+ now. If you live in Sheffield and bought a house in 1955, it isn't.

Diligence, education or any other 'hard-working families' schtick has bugger all to do with it.